Micro Finance Team

“Savings and Credit System”

Managed and Owned by the Community for Sustainable Development

Lao-German Cooperation

(Technical Cooperation)Microfinance in Rural Areas-Access to Finance for the Poor

(AFP)

Bounravong PHOMMAVIXAYMicrofinance Sr. Advisor

Soukdethphone SOUKXAYPHANHMicrofinance Jr. AdvisorFocus in Phouvong Distr.

Seansamphanh PHIMMASYMicrofinance field staffFocus in Xanexay Distr.

Phetmany LATHDAVANH

Microfinance field staffFocus in Xaysettha Distr.

Micro Finance Objectives:

Access to financial services for poor households and micro and small enterprises (MSEs) in rural areas has improved.

Programme Level intervention1. Macro level (Component 1), advice to the Bank of Laos to

develop MF sector with focusing on sectoral policy and strategies as well as regulation and supervision.

2. Meso level (Component 2), the capacities of existing village bank associations will be strengthened, new associations will be founded, and support will be given to other service providers.

3. Micro level (Component 3), the aim is to achieve qualitative improvements in the capacities of existing and new village banks.

• “One village, one Village Bank” Developing community based financial services

• Ownership All capital owned individually by saver-members, Members‘ Assembly takes final participatory decisions making with Flexibility

• Management of Village Bank(VB)VB Assembly – VB Committees on the job training – VB Auditing Mission - supported by AFP Service Team

• Promoting and linking provincial second tier organisationDeveloping financially self-sustainable micro-finance institution to be able to support the Village Banks in becoming sustainable institutions

• Supporting the development of SMEs and fostering income generating activities• Demand-driven product design

Monthly meeting for in- and out-payments and some decision making

• ProductsMonthly savings and credit service with Purpose-unrestricted credits and flexible terms (investment: production & business, social and emergency).

Micro FinanceApproach

No Activities (Starts Operations in May 2009) Unit No. Plan No. Ach % Ach.

1 Organized meeting on MF approaches/awareness raising

to villages with existing SHGs for VB foundation Vill. 30 30 100 %

2Organized meeting to draft By-Laws, contract for

establishing VB and elect the VB committeesVill. 30 28 93 %

3 Organized "On the job training" for VB committees Vill. 30 28 93 %

4 Supporting and following-up VBs (Monthly Service day) Vill. 30 30 100 %

5 Organized refresher training to VBs committee Vill. 22 22 100 %

6 Provided safe boxes and stationery for VBs Vill. 30 30 100 %

7 Matching grants for VBs Vill. 30 26 87 %

Micro FinanceActivities

Micro FinanceProblems/encounters

• Low density of populations in some consolidate villages.• Some borrower defaults (deliberately)• Low level of economic activities/limit of IGAs at village level.• Fails for problem solving due to the cultures (ethnics) while facing the conflicts.• Committee is not committed (several villages).• Unfair competition from governmental ’poverty alleviation’ schemes & Nayoby Bank.

There are cases where these conflicts could be resolved with external support.

• Provide appropriate services by MF technical staff (expertise on the field of microfinance) regularly.

• Provide stationery and equipment for their operational (secure savings facilities).

• Standardized and decentralized procedures; motivate clients to repay loans and charge full-cost interest rate.

• Propose to authority at district level & DPCU management team to support and follow-up VBs’ committees/members.

• Extension officers advide the VB borrowers for improving their skills to use in their IGAs.

Micro FinanceSolutions

Expand strategy: Consolidate VBs to set up 2nd tier organization. Continue for establishment of new VBs.Issues to be considered before transforming: Introduction of innovative products Intensification of members’ training Review of members’ criteria in joining the programFurther focus on: Independent service unit with financial self-sufficiency. Wholesales lending to VBs and Mediator for cross-financing of VBs. Establish networks with formal financial institutions which are able

to provide financial services or banking services by themselves.• Page

Micro FinanceOutlook