To strengthen financial inclusion in Southeast Asia through microfinance networks
Lao Microfinance Association (LMFA) in Laos
Vietnam Microfinance Working Group in Vietnam (VMFWG)
Cambodia Microfinance Association (CMA)
Co-organised by ADA, the first Financial Inclusion Forum took place in July 2016 in Cambodia.
By consolidating professional associations in Laos, Cambodia and Vietnam, ADA contributes to making the geographical area’s entire sector more professional. Thanks to the stronger and more competent associations, microfinance institutions are able to develop services and products that are better adapted to the needs of low-income populations.
The microfinance sector is experiencing varying degrees of development across Southeast Asia.
According to the World Bank, in 2011, the share of the population of over 15 years of age who held an account with a financial institution was 27 % in Laos, 21% in Vietnam and only 4% in Cambodia.
Although there has been a significant increase in recent years in Laos, the microfinance sector is often still in its starting stages and it is largely dominated by informal structures such as village banks. Given limited capacity, supervisory mechanisms have yet to be developed.
Created in Vietnam by international NGOs and local authorities in the early 1990s, the microfinance sector is now dominated by formal institutions which, in particular, consist of two public development banks covering 80 % of the market. A recent regulation allows the coexistence of regulated and non-regulated MFIs.
With thirty MFIs and around 1.2 million borrowers, Cambodia not only has the most developed industry but also the most effectively supervised and regulated. Amongst the actors, one commercial bank accounts for 20% of all microfinance clients.
In each of these three countries, the MFIs came together and formed professional organisations or national networks: the Lao Microfinance Association (LMFA) in Laos, the Vietnam Microfinance Working Group (VMFWG) in Vietnam and the Cambodia Microfinance Association (CMA) in Cambodia.
Although they are fairly recent, the professional associations and MFI networks play an essential role in accelerating financial inclusion. By
contributing to creating conditions that are favourable to the sector’s development, they represent a powerful means of extending financially inclusive products and services. Our project in South-East Asia thus aims to strengthen professional associations in Laos, Cambodia and Vietnam so that, in turn, they may provide efficient support to MFIs. A further aim is to enable the associations to become real spokespeople, capable of promoting the sector before the authorities and other stakeholders.
1. Support to professionnalising the associations
Depending on needs, we strengthen associations’ competences through training courses and a tailor-made follow-up schedule. This may involve carrying out audits, providing training in governance, developing the skills of the association’s personnel, taking part in strategic development, as well as supporting requests made to the regulators. As underlined by Khanmany Southammavong, who is a member of the
board of the Lao Microfinance Association (LMFA), “the continuous support ADA has given us helped us to develop a strong and central role in Laos. In particular, the differences between us and the regulators were reduced.”
2. Support in the services offered to member MFIs
By focusing on themes such as risk management, the analysis of financial performance indicators and product development, we encourage the associations to develop their services, thus ensuring that MFI competences are strengthened. In 2015, ADA contributed to designing the Certificate in Microfinance Management (MFMCC), which has become compulsory for all MFI managers in Laos. Khanmany Southammavong, who is also the executive director of the Lao MFI Patukham, tells us that “Patukham is a small MFI and we did not have the means to hire experts who could advise us on managing our MFI. Thanks to LMFA, we were able to take the MFMCC course. Its content was very rich and it provided uswith tools to improve the way we manage ourselves. Since then, Patukham has been able to reduce its bad debts, while improving its financial analysis skills.”
3. Support to communication between stakeholders and coordinating their actions
We contribute to setting up standardised systems for the monitoring of financial and social indicators, and we promote transparency and the exchange of information. The latter may involve the setting up of research repositories as well as support in writing publications and developing communication materials. We contribute to the agreement reached between the three professional associations so that they may exchange the lessons learnt all along the support program, capitalise on their experience and develop synergies on common questions. Khanmany Southammavong remembers an exchange meeting with the Cambodian association as being “a unique opportunity to learn from our neighbours’ experience.”
The Myanmar Microfinance Association (MMFA) and ADA have established a new partnership aiming at developing the association’s organizational and technical capacity. Mrs. Wendy Medrano has been appointed ADA’s on-site Technical Advisor for MMFA for an initial period of 1 year and has been based in Yangon since the end of March 2017.
ADA’s technical assistance aims to support MMFA in building effective and formalized governance as well as strengthening its organizational structure, including supporting the board to set-up MMFA’s secretariat, conduct its operations and define its operational systems and procedures. Recruitment and training of local technical staff is one of the main objectives as well as the development of services to members (including data collection and trainings).
MMFA was created in 2013 and obtained its temporary license as a non-profit association from the Ministry of Home Affairs in October 2016. The MMFA is the national association gathering microfinance practitioners (registered microfinance institutions including banks, NGOs and private companies) and other relevant stakeholders working to improve access to appropriate and affordable financial services for the poor and unbanked people in Myanmar.