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Govt considers foreign investment in micro finance
Laos may soon welcome foreign investors in micro finance as part of measures to expand financial services in the country.
The government is considering a new prime ministerial decree on micro finance, which will introduce opportunities for foreign investment in the micro finance sector, in the hope of boosting development of Laos' financial sector.
At present, the Bank of the Lao PDR only allows foreign investment in the banking sector. However, expansion of the banking sector still leaves some people, particularly in remote areas, without access to financial services, a major barrier to developing businesses and the economy.
The decree will consolidate an d elevate previously separate regulations on deposit taking and non-deposit taking institutes and credit unions. There are currently three regulations which regulate micro finance institutions in Laos.
The first regulation dictates the key requirements of deposit taking micro finance institutes, namely a loan size limit of 10 million kip per customer and minimum initial capital of 1 billion kip.
The second regulation relates to savings and credit unions, which can take deposits and lend only within their member group, and the final regulation is for non-deposit taking micro finance institutes, which offer a diverse set of microfinance services but rely on savings as the basis for lending.
According to a World Bank report, the Lao microfinance sector has gradually improved in recent years. As of December 2010, there were 28 micro finance institutions registered under the Bank of the Lao PDR compared to 10 institutes in December 2007.
With support from donors, the central bank arranged several training courses for micro finance institutions on accounting, business planning, management of information systems and loan delinquency management over the past year.
There are about 20 commercial banks in Laos, four of which are state owned and the rest joint ventures or foreign banks. The banks have increased efforts to recruit customers, resulting in expansion of their branches.
The number of bank branches has grown from 62 in 2007 to 84 in December 2010, while the number of sub-service units has also expanded from 66 in 2007 to 198 in 2010, giving people greater access to banking services nationwide.
Lao people find it easier to withdraw money from the bank due to the proliferation of ATMs in recent years. Laos had 248 ATMs nationwide at the end of 2010, up from only 12 in 2006 and 51 in 2007.
Bank access is more developed in urban areas, especially in Vientiane, but it is catching up outside the capital, where more and more commercial bank branches are being established. Bank service units located outside Vientiane have tripled since 2007, from 54 to 150. Similarly, there are now 88 ATMs outside Vientiane, compared to only nine three years ago.
vientiane times
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