MICROFINANCE PAPER WRAP-UP: Rural and Microfinance in the Lower Mekong Region: Policies, Institutions, and Market Outcomes: by Binh T Nguyen, Robert Vogel; Published by Asian Development Bank (ADB)

By Binh T Nguyen and Robert Vogel, published by Asian Development Bank (ADB), 2011, 126 pages, available at: http://www.microfinancegateway.org/p/site/m/template.rc/1.9.51104/

This document reviews the microfinance sectors in Cambodia, Lao People’s Democratic Republic (Laos) and Vietnam over the last ten years, focusing on policy environment, institutions and market outcomes in an effort to compare the microfinance sectors of these three countries against international best practices and identify challenges and possible future development patterns for each. The authors intend the paper to provide “guidance for government officials and international development agencies on which types of interventions can be most supportive of an array of efficient and sustainable institutions providing financial products and services that are attractive to the poor, especially those in rural areas” [1].

 

The authors review recent literature on the microfinance sectors in the three countries and on microfinance issues in other developing countries that are pertinent to understanding the situations in the three countries of focus. The authors visited Cambodia, Laos and Vietnam and met with officials of relevant government agencies and multiple entities providing rural finance and microfinance services. They also distributed a questionnaire to a set of microfinance service providers, of which 17 are in Cambodia, 13 are in Laos and 19 are in Vietnam. Based on the information reviewed and gathered, the authors provide a examination of the sectors in each of the countries and recommendations to address the development needs in each country.

 

The paper notes that though Cambodia, Laos and Vietnam were in similar circumstances before the formal introduction of microfinance, they have diverged significantly in their approaches to microfinance and results achieved. Mr Nguyen and Mr Vogel observe that Vietnam’s government heavily regulates sector including institutional infrastructure and the delivery of products and services. The authors recommend fundamental changes to the government’s approach to microfinance, beginning with an analytical survey to better understand how to meet the needs of the market and including technical assistance focused on training regarding best practices. Mr Nguyen and Mr Vogel observe that Cambodia’s rural and microfinance sector copmrises one government bank and several private microfinance institutions (MFIs) that provide support and technical assistance to the government bank. The authors recommend technical assistance to help Cambodian MFIs mobilize deposits and external financial support for upgrading management information systems (MIS). The authors find that Laos has a “huge unmet demand” for financial services in rural areas, with the state-owned agricultural promotion bank acting as the sole provider of agricultural microfinance. In Laos, the authors recommend implementing major reforms to the institutional structure of the sector, the provision of training and technical assistance for MFIs on best practices and strengthening and refocusing central bank regulatory activities.

 

By: Alexandra Pattee, Research Associate

 

About Asian Development Bank (ADB): Established in 1966 and headquartered in Manila, the Philippines, the Asian Development Bank (ADB) is a development finance institution that consists of sixty-seven members, of which forty-eight are located in the region. ADB has three strategic priorities: to foster inclusive growth, to facilitate regional integration and to ensure environmentally sustainable growth. To accomplish these objectives, ADB uses loans, technical assistance programs, grants, equity investments and guarantees to private companies in member countries. ADB reported a total capitalization of USD 56 billion as of December 31, 2009.

 

Sources and Resources:

 

[1] Asian Development Bank (ADB), “Rural and Microfinance in the Lower Mekong Region: Policies, Institutions, and Market Outcomes”, http://www.microfinancegateway.org/gm/document-1.9.51104/2011_adb_finance-lower-mekong.pdf

 

MicroCapital.org Article, March 1, 2011, “Through Asian Development Bank (ADB), Japan Fund for Poverty Reduction (JFPR) Extends $1.9m Grant to Develop Cambodia’s Micro- and Small Enterprises Through Access to Training, Microfinance”, https://www.microcapital.org/microcapital-brief-through-asian-development-bank-adb-japan-fund-for-poverty-reduction-jfpr-extends-1-9m-grant-to-develop-cambodias-micro-and-small-enterprises-through-access-to-training-mi/

 

MicroCapital.org Article, December 22, 2010, “Asian Development Bank (ADB) Launches $250m Microfinance Risk Participation Program”, https://www.microcapital.org/microcapital-brief-asian-development-bank-adb-launches-250m-microfinance-risk-participation-program/

 

MicroCapital.org Article, August 30, 2010, “Vietnam’s First Licensed Microfinance Institution TYM is Operational”, https://www.microcapital.org/microcapital-brief-vietnam’s-first-licensed-microfinance-institution-tym-is-operational/

 

MicroCapital.org Article, December 7, 2009, “Asian Development Bank (ADB) Provides Loan To Strengthen Regulatory Environment Of Cambodia’s Financial Sector, Microfinance Institutions To Accept Deposits”, https://www.microcapital.org/microcapital-brief-asian-development-bank-adb-provides-loan-to-strengthen-regulatory-environment-of-cambodias-financial-sector/

 

MicroCapital.org Article, September 11, 2006, “$10 Million in Loans from Asian Development Bank to Laos for Microfinance Regulation and State Agriculture Bank”, https://www.microcapital.org/10-million-in-loans-from-asian-development-bank-to-laos-for-microfinance-regulation-and-state-agriculture-bank/

 

MicroCapital Universe Profile: Asian Development Bank (ADB), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Asian+Development+Bank+%28ADB%29

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