Microfinance provider training to assist customer protection
Microfinance provider training to assist customer protection
Training for microfinance providers is currently underway in the capital on client protection principles to foster customer relationships based on trust and better financial services through enhanced capacity.
The Smart Campaign Training on Client Protection from February 25-26 is being funded by Asian Development Bank (ADB) and organised by the Microfinance Association (MFA) in partnership with the Bank of the Lao PDR.
According to a press release from the MFA microfinance providers are regulated by the Bank of the Lao PDR and serve about 170,000 clients, with a total loan portfolio of US$35 million presently.
Consequently, the training is to help institutions identify institutional vulnerabilities and strengths, and begin to prioritise areas where they can strengthen client protection mechanisms.
“Microfinance is a critical financing tool to reach out to low-income households and micro enterprises, especially in the rural areas where 80 percent of Lao people live,” Country Director of Asian Development Bank (ADB) Lao PDR Resident Mission, Ms Sandra Nicoll said during the Smart Campaign training on client protection.
Ms Nicoll explained in 2014, there were some 67 Microfinance Institutions ( MFIs) licensed or registered by the central bank to operate in the country with 40,826 loan accounts held by MFIs, a 30.6 percent increase from 2013.
The total loans outstanding held by MFIs amounted to 237.5 billion kip in 2014, an increase of 38 percent over 2013, while the ratio of nonperforming loans to total MFI loans was 5.7 percent in 2014, a decrease from 9.1 percent in 2013.
In the business sector, borrowers in the wholesale and retail trade accounted for 52 percent of total MFI loan accounts in 2014, followed by households on 27 percent, and the agriculture sector on 15.9 percent while people or enterprises in the service sector were a small group of MFI borrowers, accounting for only 1.6 percent of total MFI loan accounts.
This data showed that consumer protection was an essential ingredient for improved service quality to low income households, and financial education must go hand-in-hand with responsible lending policies of microfinance service providers.
Ms Nicoll believed the microfinance industry in Laos had room to grow to better serve underserved clients and this would contribute to reducing poverty, inclusive growth, and building a resilient national economy.
The training seminar heard it was also very important for microfinance providers to ensure their clients were treated in a fair and transparent manner and able to fulfil their debt obligations.
“At present, MFA has 114 microfinance institutions to serve customers across the country, which is an important part of creating more jobs and more income generating opportunities resulting in better livelihoods,” Director General of Financial Institutions Supervision Department of the Bank of the Lao PDR, Dr Akhom Praseuth stressed.
