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Microfinance
best practices, especially in terms of sustainability are still ignored by
supply-driven government agencies and mass organisations. As a consequence,
there is still a large underserved market for microfinance, due to the limited
number and lack of capacity of specialized microfinance providers.
The
OCISP project in Oudomxay province included a review of lessons learned from
major international development projects with a microfinance or rural finance
component. The major findings on best practices were:
Strong emphasis on staff capacity building and specialization of the microfinance component
Awareness raising in local communities at the early stages of microfinance project development is important to develop a clear understanding of the process of establishing delivery mechanisms (mostly through CBOs) and financial products conditions.
Savings-led
projects perform better and their funds grow faster, which makes
sustainability objectives easier to achieve.
Sustainability
issue needs to be widely discussed and understood among staff and clients,
including market interest rates. Best practices projects in Lao PDR have a
set a strong policy on interest rate, based on coverage of all expenses and
allowance for funds growth. The full costs recovery calculation is carefully
explained to clients.
In
community-based schemes, delegation of authority and responsibility from
project staff to local managers need to be gradual, leading to complete
autonomy.
Credit
products need to match financial needs of clients and the requirements of
their economic activity.
Controls
and systems must be in place, including transparent financial and accounting
procedures and reports.
Longer
technical support might be required to weak CBOs.
OCISP project internal documents.