The organisation of this workshop was part of the expansion of the Asia Resource Center for Microfinance (ARCM), a regional information hub on microfinance issues, established in April 2004, through a consultation and information exchange process in South Asia (Pakistan and Nepal), and expanded in September 2004 to Indonesia. The ARCM is supported by the Japan Foundation and the Foundation for Development Cooperation, and is maintained by the Banking with the Poor Network (BWTP). This resource center is a direct result from national consultations, regional dialogue and information dissemination undertaken during the past year. It is strongly anchored on the diverse BWTP membership and regional activities undertaken in the last decade.

In Cambodia, the regional workshop explored and researched the development of microfinance in the Mekong region, by focusing on four major themes:

1. Sharing information on innovative bank and MFI relationships

2. Disseminating innovations in microfinance in the Mekong region

3. Spreading best practices and developing regional standards in microfinance

4. Forms of regional cooperation in microfinance

The event built on the participation – and interaction- of major microfinance stakeholders from Cambodia, Lao PDR and Vietnam, which included microfinance providers, regulatory agencies and major supporters and donors. The workshop was jointly organised by the  Banking with the Poor Network and CARE International in Cambodia, and financially supported by the Japan Foundation and the Foundation for Development Cooperation, with additional funding support from DGRV, the German Cooperative and Raiffeisen Confederation.

The workshop took place in Phnom Penh, Cambodia on 8 and 9 December 2004, with the participation of more than 50 representatives from Cambodia, Lao PDR, Vietnam and Indonesia.  A keynote speaker from Bank Rakyat Indonesia, a BWTP member, was invited to the event, giving a broader regional perspective.

The workshop aimed at:

• Building a learning and exchange platform for the different microfinance actors in the Mekong region, to encourage dialogue, to disseminate information on successful cooperative mechanisms between microfinance institutions and commercial banks, and to learn from sub-regional experiences and international best practices, with the presence of a speaker from a key microfinance institution in Indonesia. The learning platform encouraged the development of cooperation among commercial banks, central banks and microfinance institutions and highlighted success stories in microfinance.

• Disseminating sub-regional best practices and standards and promote innovations in banking with the poor through publication and networking activities. It also aimed at improving the dissemination of lessons learned across countries in the sub-region, and encouraging the use of best practices and innovative schemes.

Day 1: Setting the scene: presentations and plenary discussions on the development of microfinance in the Mekong region, with reference to Indonesia.

Opening speeches:

• Sharon Wilkinson, Country Director, CARE International in Cambodia

• Pascal Marino, Program Coordinator for the Banking With The Poor Network

• H.E. Mr. Son Koun Thor, Chairman and CEO, Rural Development Bank (Cambodia)

Session I – Practices and standards in microfinance in the Mekong region

• Hout Leng Tong, General Manager, Hattha Katsekar Ltd. (Cambodia)

• Mr. Souphith Darachanthara, Chief of Development Research Division, National Economic Research Institute, and Manager of Microfinance Capacity Building and Research Project (Laos)

• Ms Nguyen Ngoc Thuy, Senior Design Officer, CARE (Vietnam)

• Ms. Duong Thi Nam, Chief Family Economy Section, Women’s Union of Ho Chi Minh City (Vietnam)

• Ms. Nguyen Bich Vuong, Director, TYM Fund, Vietnam Women’s Union (Vietnam)

Session II – Commercialisation of microfinance and linkages between microfinance and commercial banking

• Mr In Channy General Manager, ACLEDA Bank (Cambodia)

• Sulaiman Arif Arianto, Manager of BRI Regional (Bank Rakyat Indonesia)

Day 2:  Supporting the development of microfinance in the region: alternative financial institutions, innovations, and regulations

• Global trends in microfinance, Paul Luchtenburg, World Relief (Cambodia)

Session III – Development of alternative financial institutions

• Phal Pisey, CEO, Cambodia Community Savings Federation (Cambodia)

• Mr. Vinh, German Cooperative and Raiffeisen Confederation –DGRV- on People’s Credit Funds (Vietnam)

• Dr. Sisaliao Svengsuksa, President CCSP, supported by German Cooperative and Raiffeisen Confederation –DGRV- (Laos) 

Session IV – Microfinance innovations in the Mekong region

• Nguyen Hong Hanh, Microfinance Program Manager, Save the Children US (Vietnam)

• Keolabthavong Songsamayvong, National microfinance adviser, Oudomxay Community Initiatives Support Project (Laos)

• Cedric Salze, Project Manager, Health Insurance Project, GRET (Cambodia)

Session V – Microfinance regulations and public intervention in microfinance

• Mr. Phan Ho, Director of supervision Department, National Bank of Cambodia

• Mr. Phanthaboun Sayaphet, Deputy Managing Director, Agriculture Promotion Bank (Laos)

Practices and standards in microfinance in the Mekong region

Mr. Hout Leng Tong, Hattha Kaksekar Ltd. (Cambodia)

An interesting and straightforward presentation provided much needed transparency on the challenges and problems encountered in evolving into a strong sustainable MFI in Cambodia. HKL showed us the importance of control and procedures in microfinance, especially in terms of cash management and credit appraisal and approval. By transforming itself into a professional MFI, proposing a unique product, HKL has demonstrated that a change of business model is possible, and that MFIs do need to adapt to their environment.

Mr. Souphith Darachanthara, NERI, Manager Microfinance Capacity Building and Research project (Laos)

Mr. Souphith described the current microfinance landscape in Laos, as well as its challenges and new initiatives. A number of group-based methodologies are used in Laos, focusing on a strong involvement of the communities served. Government programs and mass organisations are the main providers of financial services for the poor, with Lao Women’s Union having the largest geographical coverage. Lao microfinance sector still suffer from a lack of specialisation of the institutions involved in microfinance, weak capacity and track record in microfinance, poor dissemination of best practices, and difficult environment. Several initiatives might change the face of the microfinance sector in Laos, with a proposed new legal environment, improved information sharing and policy development.

Ms. Nguyen Ngoc Thuy, CARE (Vietnam)

Ms. Thuy reported on CARE Vietnam involvement in microfinance through successive development projects in the Mekong delta region. CARE worked with Women’s Union in the implementation of credit and savings schemes, providing financial and technical assistance, and Ms Thuy reported on the strength and weaknesses of their model. CARE recently decided to change partners and to work through the People’s Credit Funds. Lessons learned are that microfinance should be demand-driven and adapted to each type of clientele, microfinance should also be combined with capacity-building, and that schemes are more successful if they involve joint-liability groups.

Ms Duong Thi Nam, Women’s Union, Ho Chi Minh City (Vietnam)

As a mass organisation, Women’s Union also propose microfinance services to his members, through solidarity groups of five members, which also require compulsory savings. Loans conditions are flexible and adapted to the clients’ businesses. WU’s microcredit program has posted high repayment rate, while WU also provides other social services to the clients. Women’s Union is committed to professionalise its microfinance program, by developing its monitoring and control capacity, improving its products, which would allow them to attract new sources of external funds.

Ms Nguyen Bich Vuong, TYM Fund (Vietnam)

TYM Fund is operated by the Women’s Union, using a Grameen Bank model and targeting women in poor communities in Northern Vietnam. It proposes a wide range of loans, requiring compulsory savings, but also offers flexible voluntary savings, as well as a life insurance product, covering loan balance and funeral expenses. TYM Fund is much appreciated as it proposes a personalised service to its clients. It is seen as one of the leading microfinance providers in Vietnam.

Commercialisation of microfinance and linkages between microfinance and commercial banking

Mr In Channy, ACLEDA (Cambodia)

Mr In Channy described the history and transformation of ACLEDA, from NGO to specialised bank, and finally into commercial bank. With its new status, ACLEDA was able to provide additional services, to attract new source of funds, and to comply with new regulations. It also became more customer-focused and customer-friendly. Working with micro to medium enterprises, and with development institutions, ACLEDA is now the leading microfinance provider in Cambodia, and one of the best commercial banks, especially in terms of credit delivery. ACLEDA and MFIs have complemented each other in providing a broader range of financial services, while ACLEDA has further promoted microfinance by channelling MFIs’ funds to their branch networks.

Mr Sulaiman Arif Arianto, Bank Rakyat Indonesia.

Through the example of BRI in Indonesia, Mr Arianto demonstrated that a development-oriented organisation could transform and become a leading financial services provider in Indonesia. Serving a wide range of clients, BRI also reaches the economically active poor, first with savings services, but also with credit. Moreover, BRI is also used as a channelling body for poverty alleviation projects targeting the poorest. BRI’s success results from a strong focus on sustainability, the simplicity of its products and their accessibility, and good monitoring and control systems ensuring transparency. The future challenge of BRI is to link corporate and small enterprises, to extend its outreach and to introduce more technology at the service of its clients.

New trends in microfinance

Mr Paul Luchtenburg, World Relief/CREDIT (Cambodia)

Paul provided an interesting review of current trends in microfinance around the world, focusing its attention on several key issues. He provided a testimony of the rapid growth of the industry, now reaching around 100 million people, and the increased competition, making microfinance more responsive to demand and client preferences. He also mentioned the changing role of donors, now supporting more advanced development in the industry, while private and social investors provide more and more capital to microfinance. To cope with this change, governments have established regulatory frameworks to support, monitor and regulate the rapid growth of financial services for the poor. Finally, Paul reinforced the importance of network development in microfinance, as well as the dissemination of innovations (technology, delivery, funding). 

Development of alternative financial institutions

Phal Pisey, Cambodia Community Savings Federation (Cambodia)

Started in 1998 as a project of CARE Cambodia, CCSF was established as a separate organisation in early 2003, using a Credit Union model. It mostly works in Battambang region (85 villages), providing technical assistance and refinancing to 39 savings banks, which provide their 15,000 members with savings and credit products, as well as loan protection and life savings services. CCSF maintains a very low delinquency ratio (1.27%), while aiming at reaching self-sufficiency.

Mr Vinh, German Cooperative and Raiffeisen Confederation (DGRV), supporting the People’s Credit Funds (Vietnam)

People’s Credit Funds comprise approximately 1,000 credit cooperatives serving 1,000,000 households in 53 of the 64 provinces of Vietnam. PCFs are supervised by the State Bank of Vietnam, which issues licences to new PCFs as well as guidelines on auditing, training and deposit insurance. The Central Credit Fund (CCF) operates as a liquidity-exchange and apex institution for the PCFs.  DGRV provides advisory assistance to develop an operational decentralised network of PCFs.

Dr. Sisaliao Svengsuksa, Fonds Coopératif and CCSP, supported by DGRV (Laos)

The ‘Fonds Coopératif’ (FC) is a privately owned umbrella organisation serving a network of credit cooperatives (‘CCSP’) and private enterprises, reaching approximately 1,500 clients. It targets rural population involved in the sale of production surpluses and urban population in family-run microenterprises. Its main shareholders are CCSPs (44%), and international investors (SIDI for 26% and others). With support from shareholders, FC aims at developing its outreach, strengthening its human resources and developing local ownership.

Microfinance innovations in the Mekong region

Nguyen Hong Hanh, Save the Children US (Vietnam)

Save the Children US (SCF) has implemented since 1998 a rural microfinance program in collaboration with the Women’s Union, which provided the social structure to reach 9,500 clients. Learning from this experience, SCF has now started a new urban program reaching 1,300 clients, which will be fully developed into a tripartite agreement between SCF, a service company and a commercial bank. SCF will continue to provide technical assistance and funding support to the service company, the service company – still fully owned by SCF – will operate as an MFI except that the loan fund and banking activities will be under the control and responsibility of the commercial bank. SCF was expecting to conclude an agreement with a commercial bank by the end of 2004.

Keolabthavong Songsamayvong, Oudomxay Community Initiatives Support Project (Laos)

The Oudomxay Community Initiatives Support Project (OCISP) is an integrated rural development project co-financed by IFAD, the Luxemburg government and the World Food Program, operating in Oudomxay province. Through a rural finance services component, OCISP aims at providing access to savings and credit services to rural populations organised in village-based organisations. These organisations receive from OCISP ongoing technical assistance, start mobilising savings, and then have access to capital matching funds to co-funds their credit needs.

Cedric Salze, Health Insurance Project, GRET (Cambodia)

Still in a pilot phase, the health insurance scheme for rural households in Cambodia, developed by GRET is a unique mechanism to provide to patients an easier access to public health facilities against the payment of an annual premium. The project has had a positive impact on the health status of project clients (around 1,600 people), who have also been able to reduce their health expenditures, generating savings that were reallocated towards economic activities, and the decrease of indebtedness. The scheme will enter into a scaling-up phase between 2005-07 to demonstrate overall financial sustainability.

Microfinance regulations and public intervention in microfinance

Mr Phan Ho, National Bank of Cambodia

Some of the objectives of the National Bank of Cambodia (NBC) relate to microfinance, such as the promotion of further access to rural finance, the support to sustainability and soundness of MFIs, and the protection of the general public in their financial dealings with MFIs. NBC regulates the microfinance sector by issuing licences to MFIs operating in a large scale, and requiring registrations for smaller entities. MFIs also need to obey to prudential rules, loan provisioning, and reporting requirements. Ten MFIs are now licensed, 27 registered, while 60 NGOs have a rural finance activity.

Mr Phanthaboun Sayaphet, Agriculture Promotion Bank (Laos)

The Agriculture Promotion Bank (APB) is the government’s main vehicle for rural finance, through 50% of its capital affected to policy lending. It is now in a restructuring phase, which involves for APB to be more market-oriented, and financially self-sustainable. It also involves the financing of microfinance initiatives, notably a pilot project supporting Savings and Credit Unions. In addition to the development of a policy framework of rural finance, the proposed program aims at phasing out of policy lending and interest rate subsidies, while also developing a microfinance fund to ‘catalyse’ the microfinance sector in Lao PDR.

Several group discussions focused on four main topics:

1. How can the Asia Resource Center for Microfinance (ARCM) be most useful?

2. What are the critical lessons learned about Savings Mobilisation and other source of financing that are replicable?

3. How can we ensure we use Best Practices around the issues of transparency, and accountability to obtain good governance?

4. What are innovative ways of including the poor while simultaneously pursuing sustainability?

A brief summary of the main responses given during group discussions si provide below:

1. How can the Asia Resource Center for Microfinance (ARCM) be most useful?

The ARCM would be the most useful in providing the following services:

• Listing of upcoming events and training opportunities

• Dissemination of best practices (interest rates, strategies of poverty targeting…)

• Production of CDRom resource materials

• Lessons learned from success stories and failures

• Organisation of national forums and an international event every two years

• Training center (at national and regional levels)

• Sharing research reports and findings

• Database on microfinance organizations

• Information on alternative structures and methodologies

• Materials translated into local languages

2. What are the critical lessons learned about Savings Mobilisation and other source of financing that are replicable?

Lessons learned are diverse, according to the approach taken to mobilise savings or external funding, in support for microfinance:

 A - Commercial approach

• Safety of deposits, guarantee mechanisms

• Interest rates higher than inflation rates

• Other sources of financing for microfinance: international donors and investors

• Need to respond to clients’ needs

• Need government regulation to attract additional funding

        B - Non commercial approach

• National fund dedicated to the poor

• Cooperatives (Mekong region, and Indonesia)

• Donations to NGOs

• Profit sharing (Corporate Social Responsibility)

• % of lending portfolio to reach the poor

3. How can we ensure we use Best Practices around the issues of transparency, and accountability to obtain good governance?

There is a need to adopt a multi-level appropriate structure and organisational regulations, from the board of directors to the community level:

Board of Directors:

• Regular meetings, documentation

• Operating and management systems, transparent

• Internal control committee (financial and social objectives)

• Professional skills required

• Sustainability

Management:

• Clear structure

• Policies in financial management, credit & savings, operations, disseminated to all staff

• On-job training program

• Incentives schemes

• “Client protection policy”

• MIS – information sharing to ensure accountability

• Managers represented in BoD.

Community:

• Context specific

• “Client benefits” policy to ensure clients are well served and are satisfied

• Linkages with other providers for other services to be provided to clients.  

4. What are innovative ways of including the poor while simultaneously pursuing sustainability?

Several measures can be adopted to serve the poor in a sustainable way:

• Good organisational structure means an effective and productive organization, and result in decrease of operating costs

• Mix of clients vs. Mix of products (other non-poor clients)

• Attract donors and investors (needs to be strong in financial management, results and effectiveness)

• Increase of small-scale savings by new products and diversification

• Human Resources Management: to integrate training, incentives vs. disincentives (staff and clients), to develop management skills

• Promotion of savings and credit schemes through SHGs (eg. farmers coop.), with sustainability objective.

The workshop was a unique opportunity for more than 50 microfinance stakeholders from three countries of the Mekong region to share experiences and learn from each other through practical examples relevant to all. Participants have expressed a strong interest to initiate regional cooperation in microfinance within the Mekong region, and beyond. In fact, each country represented brought a unique contribution to the further development of microfinance in this part of the world.  Participants from Lao PDR promoted the value of community-based microfinance schemes while presenting recent initiatives undertaken by government and international donors to develop a microfinance sector in Laos.  From Vietnam, we learned from the challenges and success in using mass organisations and public entities to deliver microfinance, while current reform were expected to liberalise the microfinance sector and allow the creation of independent microfinance institutions.  Cambodia brought a more commercial approach to microfinance development, with an enabling regulatory framework that has promoted the growth of a vibrant microfinance sector.

Note: papers and presentations are available upon request and on BWTP website.

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