In Cambodia, banking inclusion goes through the mobile phone

At the counter of Brown Coffee, a popular brand in Phnom Penh, Malen aims his smartphone at the QR code displayed near the counter. Then she types the amount to be paid on the screen. She adds her secret code. Immediately, it is paid. The merchant behind his counter receives a message confirming this on his own device. “It’s really practical, I no longer have any cash on me”says the young woman, an executive in the business district of the capital where the new shopping centers are growing.

The same gesture has become familiar to a large number of Cambodians. It has also been adopted by the food vendors who are numerous on the street corners. Payment by mobile phone tends to become widespread in Cambodia. This is not the only place in the world where it grows. But the originality of the Cambodian system lies in the fact that it was piloted by the national bank, and not by private companies. It is free and has become a banking inclusion tool.

This payment system makes it possible to pay both from a bank account and from an electronic purse (a “wallet”), while a majority of Cambodians are not banked.

“It opens up new possibilities. Until now, we had never made a loan to an individual without a bank account. But now it becomes possible because the wallet provides a history of its payments. We can therefore verify that a person receives a salary twice a month and entitle him to a loan.explains Jean-Pierre Gagnon, a Canadian who became vice-president of Cambodia’s fourth bank, Sathapana.

The name comes from one of the temples of Angkor

The system created by the central bank of Cambodia is called the Bakong, named after one of the temples of Angkor. It saw massive adoption during the Covid pandemic, as Cambodians went into lockdown, and physical commerce came to a standstill. Since then, the use has spread: “The equivalent of $3.5 billion was paid in 2021 through the Bakong system, says Khou Vouthy, deputy director general of the Cambodian central bank. And during the first half of 2022, it is the equivalent of 5.8 billion dollars. Now 40% of GDP goes through this means of payment”he calculates.

The Bakong ensures payment security using the blockchain, a technology originally designed for cryptocurrencies, such as bitcoin. Payments are accepted up to an amount equivalent to 2,000 dollars (2,036 €).

30,000 agents nationwide

To access the system, those who do not have a bank account must create an electronic wallet with one of the many private operators who offer this service. “There are 30,000 agents across the country who accept physical payments to load a wallet. You can go to them to add to your wallet or to collect cash”explains Khou Vouthy.

The system was also designed to drive down the dollar, which is more widely used in Cambodia than the local currency, the riel.

The local private banks seem to have dragged their feet in getting behind the project, as each had developed its own system. But the Bakong has a more universal character. And in this country which has long remained on the sidelines of development, where 75% of the population lives in rural areas, it has become a symbol of the technological leap in progress. In Cambodia, the fixed telephone does not exist. It only covers 0.3% of the population. But all Cambodians have access to the mobile network. The number of SIM cards in circulation corresponds to 120% of the population. Many Cambodians have several cards to take advantage of the most advantageous rates.

The Bakong not yet connected to neighboring countries

However, the Bakong has its limits: for the moment it is impossible to make money transfers from abroad using it. This is the next stage of the project: “We are discussing with the central bank of Malaysia. One million Cambodians work in this country and it will be a big improvement if they can send money more easily, free of charge”explains Khou Vouthy.

The system could then expand with the launch of a central bank digital currency, an e-riel. Many central banks around the world are wondering about the advisability of creating a digital currency, so as not to leave the way open to private digital currencies, such as the one Facebook wanted to launch for a while. China is the most advanced country in this area, with experimentation at the local level. But if Cambodia decides to follow, it will have already created all the infrastructure: “We laid the rails, says Jean-Pierre Gagnon. And it will be easy to roll a new monetary vehicle over it. »

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