SPECIAL REPORT: Accelerating Financial Inclusion in the Mekong through Collaboration

AtBanking With the Poor Network the 2016 Mekong Financial Inclusion Forum, MFIs and funders led this session’s discussion of collaboration. Kelly Hattel, Financial Sector Specialist for the Asian Development Bank, underscored “the importance of having national strategies for financial inclusion and having them be evidence-based. These are important…both as a donor individually and for donor coordination.” She added that MFI networks can contribute significantly to these strategies and that “it cannot be denied that regulation is important, especially with savings. But regulators shouldn’t hold too tight. This minimizes innovation. It is better to let the market grow and watch where to tighten up” later in the development of the market. In addition, she cited the importance of basics like roads and telecommunications infrastructure.

Kiatchai Sophastienphong, Thailand’s Vice Minister for Finance, pointed out that his country’s inclusion policy extends beyond finance. “The government is trying to achieve inclusive growth by paying attention not just to the financial needs of the poor and underprivileged, but to everything they have been denied over the past three or four decades.” It has channelled billions of dollars to government-owned banks with the intent of increasing the productive capacity of poor people in rural areas.

Mr. Sophastienphong described the Finance Ministry as “one of the largest landlords in the country,” as a result of its work with the private sector to provide affordable housing. Also, he described the engagement of major agricultural firms in helping smallholder farmers to work together to achieve economies of scale – not by sharing ownership – but by tending contiguous parcels as a single, larger unit.

Mirjam Janssen, Triodos Investment Management’s Regional Manager for East and Southeast Asia, said “every country has its own challenges and is in its own phase of development. In Cambodia, attracting funding may be one of the challenges going forward – new investors too, not just the current group of social investors.” However, she cautioned that for-profit investors may be coming in soon and “if they buy a stake at a high price, they will want high returns.” She added that in Lao PDR, it is hard to invest due to the cap on interest rates and the high cost of hedging the local currency.

Dr. Bun Mony, Sathapana’s Chief Executive Officer, praised Cambodian regulators for “allowing MFIs to compete freely in the market.” Citing a monthly interest rate of 10 percent charged by moneylenders, he stated that Sathapana strives “to make sure the mission is to bring people out of poverty ASAP, not make them poorer [because]… the success of the client is the success of the [MFI].”

Regarding client preferences, he said that – although Internet and mobile banking are useful tools – many clients still prefer in-person service. Sonexay Sithphaxay, the Bank of the Lao PDR’s Deputy Governor, concurred that mobile banking can be valuable, especially when available via basic mobile phones. Getting this service running required collaboration among MFIs and telephone companies. Likewise, Mr. Sithphaxay explained that collaborating with international organizations was helpful in terms of capacity building and technical assistance.

In terms of building human resources capacity, both Sathapana and Acleda were cited for training staff in significant numbers. Dr. Mony stated that before 2000, Sathapana had to recruit outside Cambodia to find accountants. Ms. Janssen said “training is crucial. The job is tough. [It is important to] offer a career path for loan officers to get promoted. Being out in the field every day is hard. [We must] give them something to look forward to.”

In addition to training staff, it is important to educate clients. Mr. Sithphaxay said “we teach them to save and invest in income-generating activities to reduce poverty.” In response to the low education level in the country, Lao PDR has established a 10-year roadmap that focuses on financial literacy as part of a larger effort to boost education. Ms. Hattel argued that networks can help with capacity development in support of financial education and preventing overindebtedness. Dr. Mony added that it is critical to protect clients with such efforts.

Regarding increasing financial access, Mr. Sophastienphong offered a few examples of creative ways to get loans to people who could benefit from them: “I just visited a community financial institution where the bulk of the clients run market stalls. They might borrow USD 10,000 to USD 15,000 and repay over one to three years at an interest rate of 2 percent per month. The institution accepts the market stall as collateral even if its title is unclear.” Similarly, motorcycle drivers have a green shirt that indicates to police that their vehicle is registered. The institution also accepts this as collateral even though it does not have a market value.

To share effective ideas, Ms. Hattel cited the benefit of collaborating through events such as this Forum, study visits and other international exchanges. Mr. Sithphaxay stated that “the microfinance sector is very important to the people” and that it is integral to Lao PDR’s plan “to lead our country out of poverty, to no longer be a ‘least developed country’ by 2020.”

In anticipation of the recently announced Asia-Pacific Financial Inclusion Forum, which will be held in Hanoi, Viet Nam, on March 21 and March 22, 2017, MicroCapital is publishing this story as part of a series from the Banking with the Poor Network‘s Mekong Financial Inclusion Forum, which was held in July 2016. The Foundation for Development Cooperation engaged MicroCapital to assist in documenting the event.

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