Australia Continues to Support Financial Inclusion through Village Banks in Laos
The Australian Government has provided additional funding of 1.83 million Australian dollars for the project ‘Microfinance in Rural Areas-Access to Finance for the Poor’ (AFP) in Laos, according to a press release by GIZ on Nov 17.
The AFP project was initiated under German Development Cooperation in 2009. The Australian Government has provided substantial financial support to the project since 2013 in order to expand the geographical focus of the project to the provinces of Champassak, Saravan and Savannakhet and to advance work on financial literacy and consumer protection. The AFP project is being jointly implemented by the Lao central bank – Bank of the Lao PDR (BoL) and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)
The project works towards improving access to –and responsible usage of – financial services in rural areas of Lao PDR through community-managed village banks. To date the AFP project successfully serves 529 village banks in six provinces of Laos on a monthly basis.
Mr Sonexay Sithpaxay, Deputy Governor of the Bank of the Lao PDR, Australian Ambassador to Laos Mr John Williams and German Ambassador Mr Michael Grau attended the signing ceremony. Mr Sithpazay thanked the Australian Government for their continued support to advance financial inclusion in Lao PDR. He acknowledged the project’s continued success and urged stakeholders to keep a strong focus on further increasing the quality of operations. Mr Sithpaxay added that the project has contributed well to improving the livelihoods of Lao people and creating more conducive microfinance sector regulations.
Australian Ambassador to Laos Mr John Williams congratulated BoL and GIZ for the effective project implementation, and highlighted the strong achievements of the project in bringing sustainable financial services to the underserved rural population, and building their knowledge, skills and attitude when it comes to household finances. He continued by emphasizing: ‘Australia is proud to be one of the Lao PDR’s most important partners in the microfinance sector. We are delighted to be working closely with our friends from Germany and UNCDF, and with Bank of the Lao PDR to deliver these programmes for the Lao people.
“We understand that the projects are having a direct impact in strengthening rural entrepreneurship and incomes and supporting poverty alleviation. We know access to finance is a great enabler of inclusive private sector development,” William said.
In his speech, German Ambassador Mr Grau stressed the importance of financial services to advance local economic development, and the role village banks play in this process. He further highlighted the project’s success in organizing local communities, holding elections to assign governance boards, and providing continuous capacity development for their members. Mr Grau proudly referred to the Lao-German government negotiations that we held at beginning of November and in which the German Government committed additional finance for the project as well.
The AFP project builds on more than ten years of experience with the overall objective to enable the rural population to access and make better use of sustainable financial services. To reach this goal, AFP has supported the Bank of Lao PDR in the formulation of the PRIME Ministerial Decree on Microfinance Institutions and setting up a market surveillance software system for the Financial Institution Supervision Department.
To enhance the sustainability of village-bank operations, the project funded specialized microfinance institutions that provide permanent oversight, technical support as well as saving and credit facilities for members. Today, seven specialized microfinance institutions are providing assistance to local village banks in 22 target districts. Three NSOs are already covering their expenditures through operating income, proving that the concept is financially viable. By October 2016, the project had facilitated the foundation of 529 village banks, which manage more than 58,173 active accounts. The value of accumulated savings already exceeds 102 billon kip (US$12.5 million). More than 18,500 members are currently borrowing a total volume of 93 billion kip (US$11.4 million) from their village tanks. AFP puts a special focus on the empowerment of women, and more than every third decision-making position in the village banks is now held by women.
The additional funding underlines that project stakeholders are committed to further enhance financial inclusion in Laos. AFP village banks have proven to be an effective instrument and an important pillar that is widely accepted by international donors, Lao government agencies and society. Important next steps are to build on the project’s knowledge and to scale up the approach to better support the additional 5,000 village funds which currently exist in Laos.
Source: Vientiane Times