Vietnam’s Payment for Forest Environmental Services (PFES) mechanism has generated nearly $400 million for improved forest protection since it was first piloted in 2008. To date, payments to rural forest owners have been made mainly in cash. Cash payments present security risks, require complex and time-consuming travel, and create opportunities for corruption.

In order to increase transparency and reduce risks, USAID’s Vietnam Forests and Deltas (VFD) Program is collaborating with the Vietnam Forest Protection and Development Fund, Lam Dong and Son La provinces, and Viettel to pilot electronic PFES payments via mobile phones. On January 30, Cat Tien National Park in Lam Dong province successfully completed the first PFES e-payment by transferring payments to 258 households who help protect the park’s forests. VFD will continue working with Lam Dong and Son La provinces to further expand e-payment to 12,000 additional households during the initial pilot phase.  Following the successful pilot, Vietnam’s Ministry of Agriculture and Rural Development expects to issue guidance on e-payments, which is a much more effective payment system, to the 500,000 households receiving PFES payments around the country.

So What? The PFES program’s adoption of digital finance is an important innovation that promises to increase transparency, security, and efficiency. This mechanism has the potential to reach 500,000 PFES recipients throughout Vietnam, and may also be applied to other sectors to improve financial inclusion of rural households.