Paper

Microfinance in the Lao PDR 2009

Examining microfinance growth in Lao PDR
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This survey presents an overall picture of the microfinance sector in Lao PDR. A total of 218 entities provided data for the survey. They comprised 5 deposit taking and 8 non?deposit taking MFIs, 13 savings and credit unions and 192 entities providing information on village funds.

The survey reveals that outreach of microfinance has significantly increased in Lao PDR in terms of savers and borrowers, villages with their own funds, savings mobilized, and loans disbursed. Achievements include the establishment of a regulatory framework for the formal microfinance sector and the transition of the semiformal microfinance sector from unsustainable credit driven revolving funds to self reliant savings led village savings and credit funds. Survey findings indicate that:

  • Challenges of the growing microfinance sector include expansion of outreach and MFI capacity building;
  • Government agencies that are taking over projects from international organizations lack experience and technical competence;
  • Village funds are establishing sustainable network organizations that provide technical, financial, monitoring and reporting services to their members.

A system of delegated supervision might evolve once Bank of Lao PDR recognizes these network organizations as legal representatives of village funds and helps strengthen their capacity as monitoring and reporting agencies.