To boost financial inclusion and enhance digital transformation, the Central Bank of Laos, in partnership with the Japanese fintech company SORAMITSU, has successfully launched a prototype of a digital currency called the Digital Lao Kip. This important initiative, first announced in February 2023, aims to meet the needs of people who have no access to a bank account in Laos using blockchain technology. SORAMITSU also helped Cambodia develop its digital currency, named Bakong, in October 2020. The digital currencies use a blockchain system developed by the firm.
Boosting financial inclusion and reducing the unbanked population
The major goal of the Lao Kip Digital project is to improve financial inclusion in the country. In Laos, about 70% of the population has no access to a bank account, and cash is still used to transact, store, and transfer payments. Lack of access to financial services creates limitations in savings opportunities and credit availability, as well as difficulties in performing safe and efficient transactions. The Central Bank of Laos can bridge this divide and empower the people who have no access to a bank account by introducing digital currencies.
Although exact data and figures have not been provided, there are encouraging signs of progress in reducing the number of people in Laos with no access to bank accounts. Increased access to digital financial services fosters increased active participation in the formal economy, resulting in improved financial inclusion. Digital currencies, such as the Digital Lao Kip, can also help further this cause by providing digital financial services to people who have no access to a bank account, facilitating cross-border money transfers, ensuring economic security, and enhancing the digitization of local SMEs, which dominate the Laos economy.
Key Factors Contributing to Success
The collaboration of Laos’ central bank and SORAMITSU has resulted in the development of a functional blockchain system adapted to the country’s specific demands. This system ensures secure, efficient, and transparent transactions, as well as user and trader confidence. SORAMITSU has completed a one-year validity study of modern blockchain-based payment infrastructure in Laos, which began in December 2021 as part of the Japan International Cooperation Agency (JICA) initiative. Following that, the Bank of Laos PDR and SORAMITSU collaborated to conduct CBDC research until an agreement was made to begin CBDC PoC (Digital Lao Kip).
Laos’ urging decision to launch a digital currency, the Digital Lao Kip, in conjunction with SORAMITSU underlines the country’s commitment to financial inclusion. The success of this prototype test has provided a solid platform for reducing the number of people with no financial footprint, increasing economic growth, and enabling people to participate proactively in the financial system. Although problems exist, ongoing initiatives to improve infrastructure, raise awareness, and foster collaboration are critical to fulfilling Lao Kip Digital’s full potential and ensuring the nation’s financial inclusion in the future.
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