In crossing the border that separates Thailand from Laos, we were prepared for a journey beyond the bounds of the ordinary. We quickly came to realise that, even within the Asia that we are just starting to get to know, Laos is a land apart.

After crossing the border, we travelled by bicycle to Vientiane (20 km), the capital of Laos. It was an opportunity to take the measure of a nation that has been left on the sidelines of the economic growth experienced by the tigers and dragons of South-East Asia: Laos is one of the poorest republics in Asia. But we had expected worse conditions than we found. With streetlit two-lane roads, fairly modern cars and drivers who respect the rules of the road, we were able to make decent mileage on our bicycles for the first time on our world tour!

For more than 100 years, the country has been without a clear identity or any hope of economic development. Controlled first by Thailand, then by the French, it remained closed off from international trade from the time of its independence from colonial rule in 1953 until 1988. Demand for microfinance grew rapidly after the country re-opened to international trade, and the intellectuals within the state sector began to examine the concept.

One of the first people to have understood the importance of developing microcredit in Laos was Dr. Sisaliao, who founded CCSP (Credit Cooperative for Small Production), the first cooperative in Laos, in the town of Kasi (in the north of the country) in 1996.

Since then, 10 new CCSPs have been created in 9 districts of Laos, and an MFI (microfinance institution), the Fonds Coopératif (Cooperative Fund), was created in 2002 to support them. Dr. Sisaliao is currently the president of the Fonds Coopératif, headquartered in Vientiane.
He is also the founding president of Lao Farmer Products, a company that specialises in exporting “Fair Trade” Laotian products through a number of large European distribution channels. The company’s objective is primarily to assist farmers who are members of the Fonds Coopératif in selling their surplus produce, by purchasing it from the producers and processing it into saleable products. This additional support for microcredit also helps to generate revenue and jobs.

Fonds Coopératif provides microcredit to 1500 people (via the 11 CCSP cooperatives, or “branches”), of which 99% are located in rural areas. The majority of the borrowers are women. Fonds Coopératif also lends to small businesses. The total value of its outstanding loans is 6.7 million kips (approximately 600,000 euros). It has also received technical and financial support from SIDI (one of the partners of Finance Tout Terrain) since its inception in 2002.

The government is unlikely to drive the expansion of microfinance in Laos, but it is not an obstacle either. “CCSP was created without government authorisation,” Dr. Sisaliao confided. “Now there is a law that regulates social finance activities in Laos, but in fact, that law was created by us!”

However, according to Dr. Sisaliao, microfinance is only one of the tools needed in the fight against poverty. It will be ineffective without access to the means of production, without access to education (vocational training in the relevant trades), without access to medical treatment, and without access to markets.
In addition, Dr. Sisaliao does not think that microfinance is appropriate for small producers. He feels that it is better suited to their distributors, which is the area in which Lao Farmer Products operates. M. Sith, the CEO of Fonds Coopératif, agrees with him. When the MFI was first launched, he was faced with several instances in which producers failed to repay their microcredit loans.

Next, we discussed the issue of fraud. M. Sith explained that there are two types of microcredit fraud: employee fraud (where money is diverted from Fonds Coopératif assets to run loan sharking operations, or where the money is simply stolen in cash) and customer fraud (where the customers violate the terms of the contract).

With respect to the future: in the short term, the MFI would like to modernise its data management software. Currently, it is impossible to identify the numbers and statistics that are essential to good management of the MFI (moving from MBDOS software to MBVIN). The transformation of CCSP into a branch model (a change of legal status which is intended to facilitate fund transfers) is also a priority. Finally, incorporating non-financial services, in particular budget management training to facilitate customer repayments, is part of Fonds Coopératif’s 2010 plan.

In the longer term, M. Sith said that his goal is to find new sources of financing, such as grants, in order to expand his client portfolio. He would also like to improve his employees’ skills by providing them with professional training so that they can become more independent.

Laos has been a real breath of fresh air for us, both for its magnificent landscape and for the opportunity to learn about the obstacles that microfinance can encounter – obstacles which, from what we observed, are not insurmountable.