Laos

First project in Laos approved

Oikocredit SEA approved last November 2009 its first project in the Lao People's Democratic Republic.  The project is managed by Fonds Cooperatif, a credit union providing loans to its network of 11 credit cooperatives for small production.  These cooperatives in turn lend to small farmers, artisans, handicraft producers, small store owners, fair trade producers/traders and micro enterprises.

The project was approved following a study conducted for Oikocredit by the Enterprise and Development Consultants Co. Ltd (EDC) to determine the feasibility of starting Oikocredit's lending activities in the rural and urban areas of Lao PDR. The study was in line with Oikocredit's aims to expand operations in Asia, particularly in Indochina.

The market study concluded that the supply of financial services in Lao PDR falls short of the demand of majority of the rural population. Both formal and semi-formal sectors fail to serve the needs of potential borrowers due to lack of accessibility.  Furthermore, funding for microfinance activities and capacity building remains low.

Laos owes its steady economic growth to the programs and trading reforms introduced by the Government in the 1980s. In terms of financial services, the country has three functioning sectors: formal (commercial banks), semiformal (project-based interventions), and informal (loans between family and friends, and lending through houay or rotating savings). 

EDC recommended that given the current situation in Laos, Oikocredit offer not only lending services, but also institutional building and organizing work. Oikocredit can focus on qualified potential partners from INGOs, MFIs, or private companies supporting SMEs. It can provide a broad range of services with varying schemes and terms of payment to cover a wide array of economic activities. Oikocredit can also improve the outreach of retail shops and short-term enterprises by providing short-term credit and working through existing networks in the country. In so doing, Oikocredit can help create a better business environment for SMEs and mobilize individual deposits for viable projects in Laos.