ADA supports the financial inclusion of the rural population in Laos
In Laos, ADA promotes financial inclusion for low-income populations through the consolidation and professionalisation of the country's inclusive finance sector. To this end, ADA has partnered with the Lao Microfinance Association (LMFA), the representative body of local microfinance providers, since 2010.
The initial objectives of the partnership between ADA and LMFA were to professionalise the association, improve the services it provides to its members and boost sector-wide communication and transparency. Until late 2022, ADA continued to support LMFA with knowledge management and capacity-building for members, including social performance management and client protection. This longstanding partnership has now come to fruition and LMFA staff now have the necessary skills to manage the association in an autonomous manner.
Formalising and regulating village credit schemes
At the same time, ADA is collaborating with LMFA to foster financial inclusion in remote areas of Laos in the framework of a local development programme by LuxDev. ADA supported the creation and consolidation of village credit schemes (VCS), village-owned microfinance structures that provide members with affordable access to credit for economic activities without the need to provide guarantees. Villagers can take out loans for agriculture (mainly cassava), livestock breeding (cows, pigs or goats), trading, services (including handicrafts) and consumption.
The regulator and supervisor of the sector, Bank of Laos, requested the creation of a complementary structure (Network Support Organisation, NSO) to provide the village credit schemes with permanent technical support such as training and monitoring to ensure their long-term functioning and sustainability. ADA supports the NSO for the province of Bolikhamsay and has helped it to obtain a Savings and Credit Union license from Bank of Laos.
Similarly, ADA plans to extend its support to LuxDev’s local development programmes in the Vientiane and Bokeo provinces where 63 village credit schemes are currently supervised by LMFA staff. ADA will either support the creation of NSOs or develop relationships between the village credit schemes and local microfinance institutions instead.
The long-term aim is to transform the network support organisations into sustainable, autonomous microfinance institutions which are licensed and supervised by Bank of Laos.
Outlook: extending financial services to more villages and encouraging sustainable farming
LuxDev and ADA are currently developing a new multi-year programme, which will be an opportunity to continue the professionalisation and strengthening of the village credit scheme networks and to address new challenges:
- In collaboration with LuxDev, ADA has conducted a demand study and will conduct a satisfaction survey to tailor different types of loans to the changing needs of villagers.
- Further studies will explore collaboration models with MFIs and the possibility of using digital technologies.
- ADA will strengthen local agricultural value chains and encourage sustainable farming practices over the coming years.
The overall aim will be to raise the standard of living of the rural population in Laos in a lasting manner by making them more resilient to shocks and less dependent on subsidies and grants.
Further information on ADA’s activities to strengthen national microfinance sectors.
Further information on LuxDev’s projects in Laos including video testimonials LuxDev - LAO/030.
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