Phongsavanh Bank brings ATMs and electronic banking to a country with little financial infrastructure

PARISTA YUTHAMANOP - VIENTIANE

Phongsavanh Bank, the first private local bank in Laos, is preparing to usher in modern products to a country where electronic banking _ and often banking of any kind _ is unfamiliar.
 

Many Vientiane residents were enthusiastic when the high-technology bank formally opened with many turning up to open deposit accounts and familiarise themselves with its services.

Phongsavanh Bank was named after Od Phongsavanh, the sole major shareholder and a well-known Laotian businessman. Among more than a dozen banks in Laos, only a handful are foreign-owned, including TMB Bank, Bangkok Bank and a joint venture between ANZ and a Vietnamese bank. Others are majority owned by the Laotian government.

Paul Freer, the bank's managing director, said Phongsavanh Bank expected to offer comprehensive services and would open branches in all 17 provinces of the country. Phongsavahn Bank has attracted a respectable sum of deposits in the beginning of its operation since its soft opening on March 21.

''Success has been beyond our expectations. We aimed to open 1,000 savings accounts within the first week of opening, but we have achieved it within three days,'' said Mr Freer, whose experience spans one decade in Cambodia and Laos.

He attributed the success to the fact that Phongsavahn is the first Laotian bank that operates an electronic banking platform including a point-of-sale electronic database and an ATM, with Internet banking in the pipeline.

Phongsavanh Bank plans to introduce mortgages over the next one year _ the first product of its kind in Laos. Laotians currently finance home purchases through informal sources including family loans and pawnshops.

But with lack of depth in Laos's financial market, Phongsavanh Bank's mortgages are expected to be limited to 10-year maturities. In this regard, Mr Freer said credit analysis and staff ability to provide good service would be important.

He said Phongsavanh Bank would operate to the best international standards of accounting, auditing and compliance with capital-adequacy rules, with a plan to be the ''bank of choice'' by 2010.

It has hired two foreign professionals as top executives, reflecting the shareholder's commitment to operate to international standards.

''We want to build additional confidence. We are not here to take people's cash. While we target high net-worth customers, we will give fee-free services to students who have no regular income,'' Mr Freer said.

He said a key challenge was to find the right staff to operate new technology and to explain complicated products and procedures to customers.

''I'm really surprised with the quality of the people we've hired for the bank. Laos has graduates in economics but they lack international banking experience. . We will cherry-pick the best of them,'' Mr Freer said.

''The regulators here are very helpful and surprisingly unbureaucratic. This is not the thing I expected when I first came here.''

He said the ''bankable'' population of Laos was expected to grow, thanks to booming tourism.

By comparison, Cambodia's banking progress has been marred by decades of political instability.

''The issue with the Cambodian banking system is security, but in Laos, it's offering modern technology and convenience to users,'' Mr Freer said.