Microfinance in Rural Lao PDR: A National Profile

A comprehensive survey of lending, borrowing, savings and the linked institutional activity
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This paper presents a survey of the formal and informal credit institutions operating in Lao PDR. The paper:

  • Assesses the supply and the demand of financial services in the country;
  • Describes the macro policy environment.

The report presents findings that help frame the critical questions for future financially-based economic development strategies.

  • Household findings:
    • Saving strategies are broadly distributed;
    • Savings are rarely converted to deposits;
    • Low level of debts to assets;
    • Limited credit access;
    • Reliance on different sources for working capital and fixed asset loans;
    • Within family loans are largest rural credit sources.
    • Banking sector findings:
      • Limited bank outreach in rural areas;
      • Uniform terms and conditions;
      • Failure to supply micro-loans;
      • Limited deposit mobilization.
    • Informal sector findings:
      • Rapid growth of Village Revolving Funds (VRF);
      • Varying terms of loan disbursal between donor/NGO;
      • Lack of saving mobilization strategies in most projects with credit component;
      • Limited sustainability and restricted role of VRFs.

The report concludes that following steps must be taken for the future:

  • Promotion of financial sustainability through positive interest rates;
  • Improvement in the regulatory environment;
  • Improved co-ordination and clearer objectives in implementation of financial strategies;
  • Prioritization of saving mobilization.

About this Publication

By Slover C., Williams J. W., Duflos E. & Garson, J.