Professional Documents
Culture Documents
by
Kongpasa Sengsourivong
Master Thesis
Department of Regional Cooperation Policy Studies
Graduate School of International Cooperation Studies
Kobe University
Kongpasa Sengsourivong
July 2006
∗
Copyright © 2006, Master Thesis submitted to the Department of Regional Cooperation Policy Studies,
Graduate School of International Cooperation Studies, Kobe University, Japan .The views and
interpretations in this paper are those of the author and do not necessarily reflect the position of Kobe
University. E-mail: s_kongpasa@yahoo.com.
ACKNOWEDGEMENTS
for his insightful comments and support. I also would like to sincerely thank my two
former academic advisers, Associate Professor Fumiharu MIENO who provided me with
valued guidance, feedback and financial support for the follow-up survey in Laos, and
to the critical questions and invaluable comments from both Professor Seiichi FUKUI
and Professor CHEN Kuang-hui during the time of being examination committee.
wish to thank Dr. Shalini MATHUR for her assistance in editing and structuring my
thesis.
Vientiane Capital), Ms. Saikham SENGKA (the President of Lao Women’s Union at
Naxaithong city), and Ms. Khampane NAOVALARD (the Vice President of Lao
Women’s Union at Naxaithong city) for their advice and support throughout the surveys.
Thanks also to the Women and Community’s Empowering Project, particularly Mr.
Project), and the other staff of the project for their support and cooperation during the
ii
Furthermore, I am obliged to my former boss, Mr. Huw LESTER, Senior
Manager of PricewaterhouseCoopers (Laos) Ltd, and Mrs. Rae DUNSTAN who edited
and proof read my paper. Special thanks to my beloved sister and brother, Ms.
management (FEBM) from the National University of Laos, for kindly helping me to
conduct surveys. I would also like to thank my friend, Mr. Bounthone SOUKAVONG,
Economic Lecturer at FEBM, for kindly providing the students to help me conduct my
Research Officer of National Economic Research Institute, for providing me relevant data
and arranging of the surveys and to Ms. Daravanh VONGVIGIT, for kindly helping me
on data processing. Many thanks to my Vietnamese friend, Ms. Nguyen Thi Thuy Vinh,
for her helpful support on data processing and technical aspects of the econometric
software. In working through this research, I also have leant to appreciate positive
and Japan International Cooperation Center (JICE) for the financial support during study
in Japan. Finally, I would like to truly thank my beloved parents, my dear wife and my
iii
EXECUTIVE SUMMARY
economic development as one of the tools for poverty reduction. Access to financial
services is a major issue for both rural and urban areas of Laos. Consequently, the
government of Laos recognizes that access to rural finance and microfinance could be
one of the major tools for poverty alleviation and places microfinance activities as one of
the priority programs for the agriculture and forestry sector in order to promote
sustainable growth and poverty eradication under the National Growth and Poverty
Eradication Strategy. Many studies have examined the relationship between microfinance
and economic development, but until now, only two key studies were undertaken in Laos.
While these two studies made an important contribution to this subject, they had some
shortcomings as they did not correct for problems of the self-selection and endogenous
program placement.
This paper surmounts these issues by adopting the methods used by Coleman
the savings group. The survey was conducted in six villages in 2005 - 2006, in a semi-
urban area of Laos. All these villages had savings groups which were in operation for
various lengths of time. Of these, three villages had savings groups operating for more
than a year, and are called “old” savings groups. The remaining three villages also started
operating savings groups but these were in operation for less than a year. These are called
“new” savings groups. In the six villages, villagers were allowed to self-select to be
iv
savings group members or nonmembers. The survey sample included members and
nonmembers in the six villages. Members who experienced benefits from joining the
savings group by either obtaining a credit or receiving a dividend are called the
“treatment” group, and those who have not benefited from the groups are called the
“control” group. All members of the “control” group were relatively new members with
an average membership of 2.2 months. Hence, the effects on savings group members in
the treatment group can be compared with the savings group members in the control
group. In addition, differences in the length of time that savings group program has been
available to members in both treatment and control groups is taken into account to obtain
more precise impact estimates. Inclusion of nonmembers in all six villages allowed for
the use of village fixed effect estimation to control the possibility that the order in which
With this kind of survey design, the impact of savings group program on
expenses. The results illustrate that the savings group participation has large positive and
significant effects on all of these outcomes, except household yearly income from
agriculture. However, this can largely be explained by issues relating to the robustness of
the data for this indicator. In short, the participation of savings group can increase
household asset, household income from self-employment activities and support the
education of children.
v
Consequently, this paper’s findings have several important implications. Firstly,
the large positive impact savings group has on household asset suggest that microfinance
programs may improve household status in terms of wealth. Secondly, the positive
agriculture in terms of rental on rice fields, suggest that the savings group program may
be a viable strategy for the poverty eradication. This is consistent with the National
Growth and Poverty Eradication Strategy (NGPES) (2004: 65) of the Government of Lao
PDR which recognizes the importance of microfinance and has placed it as the one of the
high priority projects for the agriculture and forestry development plan. Thirdly, the great
suggests that microfinance program may be one viable strategy to reach the millennium
vi
TABLE OF CONTENTS
Title Page i
Acknowledgements ii
Executive Summary iv
Table of Contents vii
List of Tables ix
1 INTRODUCTION 1
1.1 Issues 1
1.2 Research Topic and Objective 5
1.3 Hypothesis 5
1.4 Methodology 6
1.5 Structure of the Paper 7
2 MICROFINANCE IN LAOS 8
2.1 Country Brief 8
2.2 Microfinance in Laos 9
3 LITERATURE REVIEW 19
3.1 Impact Studies of Microfinance on Different Economic and Social 19
Indicators
3.2 Methodology 26
4 ANALYTICAL FRAMEWORK 31
4.1 Theoretical Framework 31
4.2 Model Specification and Methodology 36
5 SURVEY DESIGN 46
vii
5.1 Survey Design 47
5.2 Data Description 51
6 EMPIRICAL RESULTS 52
6.1 Impact on Household House Asset 55
6.2 Impact on Self-Employment Activities 59
6.3 Impact on Education 64
7 CONCLUSION 67
REFERENCES 71
APPENDIX A 80
Table 1: Descriptive Statistics for Variables of Whole Sample Size 80
Table 2: Descriptive Statistics for Variables by Treatment Group 84
Table 3: Descriptive Statistics for Variables by Control Group 88
Table 4: Descriptive Statistics for Variables by Nonmember 92
Table 5: Impact of Savings Group on Household House Value - GLS 96
Table 6: Impact of Savings Group on Yearly Self-Employment Income 100
from Livestock – GLS
Table 7: Impact of Savings Group on Household Yearly Self- 103
Employment Income from Agriculture – GLS
Table 8: Impact of Savings Group on Household Monthly Rental 106
Expenditure – GLS
Table 9: Impact of Savings Group on Household Monthly Educational 109
Expenditure – GLS
APPENDIX B 112
Case study: Savings Groups in Naxaithong City 112
viii
LIST OF TABLES
ix
CHAPTER 1
INTRODUCTION
1.1 Issues
developing countries. It provides the funding for these people to run their micro-business
and to smooth their household’s consumption. Poor, lower income people have
banks, due to barriers such as high collateral requirements and complicated application
procedures (Yunus, 2001; and Hulme &Mosley, 1996). However, there is strong demand
for small-scale commercial financial services (for both credit and savings) among the
economically active poor in developing countries. These and other financial services help
smooth income flows, enlarge and diversify their microenterprises, and increase their
incomes (Robinson, 2001). These effects were evident from a number of impact studies
of microfinance. Based on the recent studies on this subject, microfinance has significant
empowerment.
undertaken by Hulme and Mosley (1996); Mckernan (2002); Khandker et al. (1998);
Copestake et al. (2001); Sichanthongthip (2004); Shaw (2000); Mosley (2001); and
Copestake (2002).
1
Research by Pitt and Khander (1996 and 1998); and Khandker (2003) found that
that the eligible households that participated in the microfinance programs have strikingly
less consumption levels than the eligible households living in villages without the
programs.
by Montgomery et al. (1996); Pitt and Khandker (19996 and 1998); Mosley (2001); and
Coleman (1999 and 2002). However, Mckernan (2002) found an inverse relationship
between participation in program and household assets. Mckernan also found that
Research by Chowdhury and Bhuiya (2004); Holvoet (2004); and Pitt and
Khandker (1996 and d1998) found that microfinance has a positive effect on education.
Similarly, Chowdhury and Bhuiya (2004); Pitt and Khandker (1996); and Pitt et al.
(1999) revealed that microfinance has a positive impact on health. Furthermore, Hashemi
et al. (1996); and Pitt and Khandker (1998) noted that microfinance has positive effect on
programs inflicted extreme pressure on women by forcing them down to meet difficult
and Chaleunsinh, (2005), found that the behavior of the village savings group members
was changed as a result of participating in a program. While previously savings were kept
in the form of gold, livestock, jewelry, deposits in the bank and savings at home,
2
The Lao People’s Democratic Republic (Lao PDR) is one of the poorest countries
in East Asia in terms of an estimated per capita income of US$ 390 in 2004 (World Bank
Vientiane Office, 2006). Laos is classified by the United Nation as a Least Developed
Country (LDC). According to the World Bank Vientiane Office (2006), 71 per cent of
Lao population lived on less than US$2 a day, and 23 per cent on less than US$1 a day in
2004. In the same year, 34 per cent of the population lived under the national poverty
line; infant mortality was 82 per 1,000 live births; and life expectancy was approximately
55 years.
Consequently, the government of Laos recognizes that access to rural finance and
microfinance could be one of the major tools for poverty alleviation and places
microfinance activities as one of the priority programs for the agriculture and forestry
sector in order to promote sustainable growth and poverty eradication under the National
Growth and Poverty Eradication Strategy (NGPES) (2004). Since 1987, the broad
approach of microfinance, including in kind and in cash revolving role fund, has been
However, the microfinance sector is still relatively new in Laos. Although donors have
made a significant investment in the last few years in microfinance programs, the sector
is developing very slowly. About one million economically active people potentially
quarters can not reach them. Approximately 300,000 people recently accessed loan and
savings services. Only 21 per cent have access to microcredit from the formal sector. 33
per cent are dependant on the semi-formal sector and project initiatives and the rest 46
3
per cent are obtaining financial service from the informal sector (Microfinance Capacity
Very few empirical studies have conducted to examine the effect of microfinance
or not microfinance is one of tools for poverty reduction. One empirical study of Lao
microcredit on income level of individual borrower. The study involved evaluating the
analysis. However, he did not control for selection bias in the sample. Another study
which was not aware with such bias is the study by Kyophilavong and Chaleunsinh
(2005) who estimated the impact of a village savings group in a semi-urban area of Laos
by conducting a survey for both members and nonmembers of the village savings group.
They presented only the means comparison of many impact indicators for both members
and nonmembers. Without the correction of the selection bias problem, the results may
This study will attempt to evaluate the impact of microfinance programs in Laos
by correcting for the bias described above. This study also selected savings groups in
Naxaithong city as a case study. The city is located in a semi-urban area of Vientiane, the
1
Saithani case is derived from that the Saithani Small and Rural Development Project (Saithani Project)
which was established in 1996. The Project is a cooperative management between Lao Women’s Union
and the Foundation for Integrated Agricultural Management (FIAM) (Sichanthongthip, 2004:21).
2
Data before the borrowing was collected by respondent recall.
4
Capital of Laos, and the program established as part of the Women and Community’s
Empowering Project. The location of the study was selected because most of the savings
groups are located in and around the capital. Results of a recent survey found that most of
the 357 savings groups operating in Laos were located in and around Vientiane
2004:7).
enterprise level and macroeconomic level have shown a positive impact of microfinance
on two sets of indicators – economic and social indicators – in both developing and
developed countries. However, such studies have not been widely conducted in Lao PDR.
Therefore, this paper will address this gap by examining the impact of microfinance to
household welfare or outcomes in Lao PDR. More specifically, it will investigate the
The primary objective of a savings group in Laos is to improve the living status of
borrowers and their families to bring them out of poverty. The main purpose of this paper
will be to evaluate the success of savings group against their primary objective.
1.3 Hypothesis
Most of poor people and lower income people join microfinance program in Laos
because they can access credit with specified interest rate which is lower than that
obtained from the informal money lender. They can, thus, save money. Therefore, it is
5
hypothesized that members with a long-term participation on the savings group may have
1.4 Methodology
To achieve the research objective, the author adopted the survey design and
research methodology of Coleman (1999) taking into account bias for self-selection and
endogenous program placement which was not corrected in the previous studies relating
to Laos. The author conducted a survey of 251 households in six villages in a semi-urban
area of Laos – Naxaithong district which is located 16 kilometers from Vientiane, the
Capital of Laos. Of these, three villages had savings groups operating for more than a
year, and are called “old” savings groups. The remaining three villages also started
operating savings groups but these were in operation for less than a year. These are called
“new” savings groups. In the six villages, villagers were allowed to self-select to be
savings group members or nonmembers. The survey sample included members and
nonmembers in the six villages. Members who experienced benefits from joining the
savings group by either obtaining a credit or receiving a dividend are called the
“treatment” group, and those who have not benefited from the groups are called the
“control” group. All members of the “control” group were relatively new members with
an average membership of 2.2 months. Hence, the effects on savings group members in
the treatment group can be compared with the savings group members in the control
group. In addition, differences in the length of time that savings group program has been
available to members in both treatment and control groups is taken into account to obtain
more precise impact estimates. Inclusion of nonmembers in all six villages allowed for
6
the use of village fixed effect estimation to control the possibility that the order in which
7
CHAPTER 2
MICROFINANCE IN LAOS
Many countries realize that microfinance can play an important role in economic
development as one of the tools for poverty reduction. The government of Laos also
recognizes that role and has placed microfinance activities as one of the priority programs
for the agriculture and forestry sector in order to promote sustainable growth and poverty
eradication under the National Growth and Poverty Eradication Strategy (NGPES). This
chapter will outline the general background on the development of microfinance in Laos,
The Lao People’s Democratic Republic (Lao PDR) is one of the poorest countries
in East Asia with an estimated per capita income of US$ 390 in 2004 (World Bank
Vientiane Office, 2006). Laos is classified by the United Nation as a Least Developed
Country (LDC). According to the World Bank Vientiane Office (2006), in 2004, 71 per
cent of the Lao population lived on less than US$2 a day, and 23 per cent on less than
US$1 a day. In the same year, 34 per cent of the population lived under the national
poverty line; infant mortality was 82 per 1,000 live births; and life expectancy was
approximately 55 years.
In 2004, Laos had a population of around 5.8 million and a land area of 236,800
8
and linguistic diversity with very poor infrastructure. Moreover, villages, particularly
those populated by ethnic minority groups, tend to be extremely isolated and practice
subsistence agriculture. Laos is also a landlocked country which is located in the center
of the Mekong region, bordered by Thailand, Vietnam, Southern China, Cambodia and
Myanmar, of which, the first three are experiencing rapid economic growth. Nevertheless,
Laos has significant economic potential because of its rich natural resources (such as
forestry, minerals and hydro-electric power) and its proximity to major Asian economies.
Agriculture is the major economic sector contributing 51 per cent of GDP and employing
80 percent of the labor force. The industry sector accounts for 23 per cent and services
Since 1987, the broad approach of microfinance in Laos (including in kind and in
cash revolving role fund) has been implemented by numerous development projects
which include those initiated by the government. However, the microfinance sector is still
relatively new in Laos. Although donors have made a significant investment in the last
few years in microfinance programs, the sector is developing very slowly. About one
microfinance services. However, almost three quarters cannot reach them. Approximately
300,000 people recently accessed loan and savings services. Only 21 per cent have access
to microcredit from the formal sector, 33 per cent are dependant on the semi-formal
sector and project initiatives and the rest 46 per cent are obtaining financial services from
the informal sector (Microfinance Capacity Building and Research Programme, 2005).
9
This section will briefly describe the development of microfinance in terms of
microfinance providers3 which consist of the formal, semiformal and informal sectors.
Bank (APB));
• Three joint venture banks (Joint Development Bank, Lao-Viet Bank and
• Six foreign commercial banks with branch offices and one foreign
The headquarters of each bank are located in Vientiane. APB is the largest bank
in term of branch network in Lao PDR. It has one head office in Vientiane, 18 branches
in the 17 provincial capitals and Vientiane Capital City, and 55 sub-service units at the
district level. The head office of LDB is also located in Vientiane and it has 17 branches
(one in each province). BCEL has three branches. Lao-Viet Bank has one branch in
3
This section borrows extensively from Enterplan (2003).
4
It was merged from two state-owned banks: Lao May Bank and Lane Xang Bank.
5
Public Bank (Malaysia), Bangkok Bank, Bank of Ayudhya, Krung Thai Bank, Siam Commercial Bank,
Thai Military Bank (all Thai Bank) all of which have branch offices in Vientiane. Standard Chartered Bank
has a representative office and only provides offshore guarantee facilities for overseas clients doing
business in Laos.
10
Champasack province. The rest (JVBs and FCBs) have no branches and no provincial
Practically, only one formal financial institution, APB6, has a large outreach and a
true track record in rural finance. APB was established by Decree in 1992 (Decree 92/PM
1992) to assist the development of the agricultural sector in Laos. Since March 2000,
APB has been largely under the provision of the Decree on Commercial Banks
(Decree02/PR 2000) after operating under that separate mandate. In April 2002, APB had
about 130,000 borrowers. Of these, about 123,000 were in groups (group lending). The
activities of APB have focused on the provision of subsidized loans which use funds from
A. Microfinance Initiatives
Phongsaly (PDDP), the Rural Development Cooperative (RDC), and Credit Union Pilot
Project.
6
Lane Xang Bank before merging with Lao May Bank also provided micro lending with a focus on micro-
traders (Bank of the Lao PDR, 2002: 31).
11
(1) The Microfinance project
The United Nations Capital Development Fund (UNCDF) and the United Nations
the microfinance project in late 1997. This project ran microfinance activities in
Oudomxay and Sayaboury Provinces using the group lending methodology. It also
includes the Sihom Project Savings and Credit Scheme (SIPSACRES) – an urban credit
and savings cooperative founded under UNDP project in 1995. However, the UNDP and
UNCDF did not provide funding for this project after 2002. Now, the Lao government
manages the project7. While data for 2002 is unavailable, estimated data for 2000 showed
that the microfinance project serves about 3,525 clients in total in October 2000 (United
vicinity of Vientiane is for the purposed of agriculture, handicraft, small industry and
services. CCSP also accepts savings from member and issues loan to members secured by
group guarantee and compulsory savings. In September 2002, there were about 1,000
PDDP was formed in 1997. It runs village banks for farmers in 57 villages in
Phongsaly city with the support from Agence Francais Developpement (AFD). PDDP
also requires compulsory savings from their members and leverages these with AFD
7
For the ones operating in Sayaboury and Oudomxay provinces are recently under the provincial
government authorities. SIPSACRES is currently under the supervision of Finance Department, Vientiane
Capital.
12
funds. In March 2003, about 2,350 borrowers received a loan from PDDP. In this
initiative, loans are provided for cash crops, livestock, handicraft and petty trade and it
RDC began running its activities in August 2001 when it received the funds from
villages in Vientiane Capital City. Its services include both credit and savings. Loans are
issued for different kinds of economic activities such as agriculture, handicraft and trade.
These loans require physical collateral and a 20 per cent savings deposit for guarantee.
The Credit Union Pilot Project is one of the subprojects of Asian Development
Bank TA cluster 3413 – LAO: Rural Finance Development. In March 2003, the savings
and credit unions (SCUs) were established in Vientiane, Savanakhet and Luang Prabang
Provinces. The three pilot credit unions have licensing as a condition of the ADB
In addition to the microfinance initiatives, there are about 1,600 village revolving
funds (VRFs) that have been supported by donors and NGOs (Bank of the Lao PDR,
2002: 31).
funds (VRFs) to widely provide financial services in the rural areas. These organizations
13
tend to focus on the operation in the areas which are not covered by banks including the
APB. In these areas, villagers can only access to credit from friends, family members,
and moneylenders. Around 35 INGOs and a few bilateral and multilateral agencies are
supporting rural development projects in Laos. These projects have set up cash or in-kind
funds for villagers as part of their integrated programmes. Assistance is provided for
agricultural equipment, gravity water and irrigation supplies, seeds, rice banks for food
security, animal banks, and medicinal drug fund. The projects depend on subsidized
credit and when this credit finishes when the project ends. There is rarely any local
resource mobilization. As a result of the above, a substantial number of projects are not
sustainable.
The Lao Women’s Union (LWU) is a key intermediary for INGOs rural financial
projects. LWU was established in 1955 and is a mass organization which has been
implemented at three levels – district, provincial and national. LWU operates in every
intermediary, an organizer, and as the Lao Government partner. Due to its reach into the
villages, LWU has frequently been the implementing agent or partner for INGO-
supported projects.
In addition to LWU, there are three more mass organizations 8 and five
2005).
8
Lao Youth Union, Lao Front for National Construction Office and Federation of Trade Union.
9
Agriculture Office, Planning and Investment Office, Health Office, Labour and Social Welfare Office,
and Finance Office.
14
In addition, there are many NGOs running microfinance initiatives in Laos
This sector comprises moneylenders, rotating savings and credit schemes which
locally known as Houai (daily, weekly, and monthly), traders and rich farmers.
According to Bagchi et al. (2002), inter-household loans are important among rural
households and most of these loans are made in-kind. Nevertheless, rotating savings and
credit (Houai) is a significant source of loan money for investment or emergency needs in
Moneylender
According to the Bank of the Lao PDR (2002), the role of moneylenders in both
urban and rural areas is estimated to be quite important – approximately 50 per cent of
rural villages appear to have access to money lender services. Most professional
moneylenders operate close to the markets and lend for quick turnover activities.
According to professional observation, rates have been stable for the last few years
ranging from 10 and 30 per cent per month with lower interest rates in urban areas due to
competition. Supplier credit for agricultural inputs is rare. Some foreign suppliers across
the Mekong River accept precious metals as collateral for merchandise purchases.
Bagchi et al. (2002) analyzed each microfinance practice in Laos and provide
commentary on each type of initiative. These comments are summarized in Table 2.1.
15
Table 2.1: Current practices in Laos10
10
Table 2.1 is sourced from the market research study done by Bagchi et al. (2002).
16
No. Approach/ Implementing agencies Limitations/ Challenges
Models GoL/Ministry/ Bank INGOs Bi and or
Provincial Multilateral
Authority/ agency
Mass
organization
6 Village or √ √ √ √ • Not properly designed
community • Ownership is big challenge
bank • Most of the time village elite
people have easy access to the
fund
• Often poorer people excluded
from the benefits
• Emphasis on credit rather than
savings
• Sustainability is questioned
7 Informal kinds √ √ √ • Mainly introduced for food
(cereal and security
animal bank) • No cash transactions made
initiatives • Not financial services
• Pushing back towards the non
cash economy
• Highly subsidized
• Very informally organized
• Very limited option for local
resources mobilization
8 Village √ √ √ • Ownership is a question
Revolving Fund • Often poorly designed
• Most of the time village elite
people have easy access to funds
• Often poorer people excluded
from benefits
• Emphasis on credit rather than
savings
• Highly subsidized
• Leadership is a crucial factor
• Sustainability is questioned
Although the practice of microfinance in Laos is still new and at an early stage of
outcomes. Therefore, the rest of the paper will conduct an in-depth investigation of the
17
effects of savings groups on household welfare or outcomes to determine whether or not
18
CHAPTER 3
LITERATURE REVIEW
indicators11 – economic and social indicators – at different levels12. Despite the variation
in the methods used and the results of studies conducted in various countries, the main
status, health as well as gender empowerment. The studies that have examined the impact
The effect on income has been analyzed at the individual, household and
enterprise levels. Hulme and Mosley (1996), conducted various studies on different
microfinance programs in numerous countries, and found strong evidence of the positive
relationship between access to a credit and the borrower’s level of income. The authors
indicated that the middle and upper poor received more benefits from income-generating
credit initiatives than the poorest. McKernan (2002), moreover, evaluated three
significant microcredit programs in Bangladesh and discovered that the profit for self-
19
programs were also examined at the village-level impacts in the study of Khandker et
al.(1998) which showed that they have positive impact on average households’ annual
income, especially in the rural non-farm sector. Copestake et al. (2001), estimated the
and found that microcredit has a significant impact on the growth in enterprise profit and
household income in case of the borrowers who have received a second loan.
income level of individual borrowers. This can be seen from the higher monthly income
earned after the member accessed credit, in the empirical study of Lao microfinance on
Saithani case. Shaw (2000) studied two microfinance institutions (MFIs) in Southeastern
Sri Lanka and showed that the less poor clients’ microbusiness that accessed loans from
microfinance programs could earn more income than those of the poor do. Mosley (2001)
evaluated the impact of loans provided by two urban and two rural MFIs on poverty in
Bolivia. He found that the net impact of microfinance from all institutions, at the average
level, was positive in relation to borrowers’ income, even though that net impact for
poorer borrowers might be less than the net impact on richer borrowers. Copestake
(2002) conducted the case study of the Zambian Copperbelt, applying the village bank
model to investigate the effect on income distribution at the household and enterprise
levels. The study showed that the impact on income distribution depends on who obtains
the loan, who move on to larger loans and who exits the program: group dynamics was
incomes was found, but the more marked overall effect among borrowers was of income
20
3.1.2 Impact studies of microfinance on expenditure
Khandker (1996 and 1998) estimated the effect of microcredit obtained by both males
and females for the Grameen Bank and two other group-based microcredit programs in
Bangladesh on various indicators. They showed that the clients of the programs could
gain from participating microfinance programs in many ways. It can be seen that income
program such as the Grameen Bank. Khandker (2003) also conducted research on the
The author found that the microfinance effects of male borrowing were much weaker
than the impact of female borrowing and there was decrease in return to borrowing all the
time. Moreover, he noted that the impact on food expenditure was less pronounced than
the one on non-food expenditure. Besides, he showed that the poorest gained benefits
reduction among program participants. In addition, the author discovered that there was
spillover effect of microfinance to reduce poverty at the village level. In contrast, the
impact was less noticeable in reducing moderate rather than extreme poverty. Morduch
21
(1998), however, argued that the eligible households that participated in these three
microfinance programs have strikingly less consumption levels than the eligible
Bangladesh. They found that there were positive impacts of a microcredit program, such
Program (RDP), on both enterprise and household assets. Clearly, even though total value
of household assets had a slight increase after the borrowers obtained last loans, there had
significant increase in the value of productive assets. Pitt and Khandker (1996 and 1998)
also noted that the microcredit had a positive impact on women’s non-land assets. Mosley
(2001) also pointed out that there was positive impact of microfinance on asset levels. He
further stated that accumulation of asset and income status was generally highly
correlated, which led to extreme correlation between income poverty and asset poverty.
Northeast Thailand. He found that there was a slight impact of program loans on clients’
welfare. However, he discovered that the village bank had a positive and significant
impact on the accumulation of women’s wealth, particularly landed wealth but this result
included bias from measured impact (discussed in methodology below). In contrary to the
22
program and household assets. Mckernan also found that households with fewest assets
Chowdhury and Bhuiya (2004), studied the impact of a microfinance program, BRAC
poverty alleviation program, in Bangladesh, and found that both member and non-
BRAC member households benefited much more than poor non-member households.
Furthermore, girls gained more than boys. Holvoet (2004) investigated the effects of
India – one with direct bank-borrower credit and another one with group mediated credit.
The author showed that loans to women, through women’s groups, had a significant
positive impact on schooling and literacy for girls, whereas it remained mainly
lending, there was no improvement in educational inputs and outputs for children. Pitt
and Khandker (1996) found that a credit to the participants provided by a microfinance
institution like the Grameen Bank, could grow school enrolment for children. They found,
for example, that in case of the Grameen Bank and Bangladesh Rural Development
Board’s (BRDB) Rural Development RD-12 program, credit lending to women had a
significantly positive impact on schooling for boys (Pitt and Khandker, 1998).
23
3.1.5 Impact studies of microfinance on health
Indicators related health issues are also applied as proxies to examine the impact
of microfinance. Chowdhury and Bhuiya (2004) found that microfinance program, led to
a good improvement in child survival and nutritional status. Pitt and Khandker (1996)
also noted that there was a rise in contraceptive use and decrease in fertility in case of the
participants obtaining a credit provided by the Grameen Bank. However, there was no
from the participation of women in group-based credit programs. But fertility reduction
was observed and contraceptive use slightly increased in case of men’s participation (Pitt
et al., 1999).
studied two main microfinance programs in Bangladesh, the Grameen Bank and the
Bangladesh Rural Advancement Committee (BRAC). They noted that the participation of
the programs had important positive impacts on eight different dimensions of women’s
empowerment:
• Mobility,
• Economic security,
24
• Relative freedom from domination by the family (especially, women’s
In another study, Pitt and Khandker (1998) found that the behavior of poor households
Bangladesh. It, for example, could be seen that every 100 additional taka credit provided
to women by the microcredit programs, namely the Grameen Bank, BRAC and BRDB,
provided to men from the same programs grew yearly household consumption
programs inflicted extreme pressure on women by forcing them down to meet difficult
Besides the microfinance impact on the indicators mentioned above, one study
tried to examine how the savings group in Laos affects the behavior of member of a
village savings group. It showed that the behavior of the village savings group members
was changed as a result of participating in a program. While previously savings were kept
in the form of gold, livestock, jewelry, deposits in the bank, and savings at home,
members now saved in the savings group (Kyophilavong and Chaleunsinh, 2005).
25
3.2 Methodology
main groups: those that were not concerned about selection bias problem13 and those that
were. A large number of impact studies of microfinance programs did not take into
account selection bias. According to Chen’ s review of 11 impact studies of the Grameen
Bank in Bangladesh, no study corrected the selection bias (Chen (1992) cited in Coleman
1999, p.109). Shaw (2004) also studied two microfinance programs in Sri Lanka, and
used a questionnaire and conducted interviews in one semi-urban and two rural groups.
The author presented only median comparisons of client incomes among four household
income groups (extreme poor, poor, near-poor and nonpoor), at time of their first loan
(June 1994) and at the time the research was conducted (June1999). However, he did not
take into account selection bias. Sichanthongthip (2004) evaluated the impact of a
microfinance program of the village savings group in a semi-urban area of Laos and used
program at two points of time (before and after borrowing). He reported the results of the
impact on income by applying econometric analysis. On the other hand, he also did not
control for selection bias. Another study which also did not take into account such bias is
the study by Kyophilavong and Chaleunsinh (2005) who estimated the impact of a village
savings group in a semi-urban area of Laos by conducting a survey for both member and
nonmember of village savings group. They presented only a comparison of the mean
13
As Holvoet (2004: 32) noted, “Selection bias may occur because of nonrandom program placement,
through selection by program staff, or because of self-selection by program participants”. For further
details, please read more in Baker (2000), and Greene (2000). For numerous discussions for methods to
correct that bias, please refer to Heckman and Robb (1985), Moffitt (1991), and Ravallion (2005).
26
A number of researchers, however, have attempted to correct the selection bias.
Hashemi et al. (1996) evaluated the effect of rural credit programs in Bangladesh by
undertaking ethnographic research in six villages during the period 1991-94 and
conducting a survey in late 1992. The authors classified their sample into four groups
consisting of:
• BRAC members,
• Nonmembers living in the Grameen Bank villages (who would have been
BRAC programs but who would have qualified to join the credit programs.
They also tried to address the possibility of selection bias by including nonparticipants
and participants in Grameen Bank villages and comparing them with women living in
In contrast, Hashemi et al. (1996) did not control for possibility of endogenous
program placement, even though, the authors presented the effects of credit program on
Hulme and Mosley (1996) also tried to solve for selection bias by studying
different credit programs in a number of countries. In their study, they included eight
microfinance institutions which provide group lending. Of these eight institutions, two
were used a control group in the case a loan had been approved for participants but they
had not yet received any amount of the loan. However, only the means of different
27
outcome variables for both treatment and control groups were introduced. There were no
statistical analyses of the differences between the two groups. In addition, the possibility
of endogenous program placement could not be controlled with their available data
an econometric approach and taken account of both selection bias and nonrandom
program placement (Pitt and Khandker 1996&1998; Pitt et al. 1999; Coleman 1999 &
2002; Khandker 2003; Khandker et al.1998; McKernan 2002; Morduch 1998). The
methodology was applied by Pitt and Khandker (1996&1998) to attempt to correct both
selection bias and nonrandom program placement in group lending, is described as the
below.
The authors used survey data of the Grameen Bank and two other group lending
in 29 thanas14. They sampled randomly for both members and nonmembers from villages
that had a microfinance program. They also randomly chose households from villages
without a program. In this case, credit program availability was applied as an identifying
variable. The authors, however, identified that systematic variation will occur between
the two kinds of villages because of the possibility of endogenous program placement.
Thus, village fixed effects estimation was applied to control for unobserved variation
exogenously excluded from the program by program rules which restrict participation for
household with more than 0.5 acres of land were principally excluded from membership
14
A thana is the administrative center for numerous villages.
28
consideration by any of the three programs, that were sampled for this survey. This might
have resulted from the possibility of collinearity between the village-specific dummy
variables, identifying fixed effect, and the availability of the program. Many impact
studies then applied a similar methodology. As can be seen from the studies by Pitt et al.
(1999); Khandker (2003); Khandker et al.(1998); McKernan (2002); and Morduch (1998).
But, Khandker (2003) did some further interesting work on the data set. He used the same
data set as Pitt and Khandker (1996) and, then did a follow up survey of the same
households in 1998/99 to come with panel data. However, according to Coleman claimed
Most group lending programs…do not impose such eligibility criteria. Rather,
they attempt to attract the relatively poor and dissuade the relatively rich from
participating by the small size of loans, the high frequency of meetings, and the
stigma of belonging to a poor person’s credit program. Hence, the method of Pitt
and Khandker could not be implemented in most group lending programs.
Moreover, even in the context of the three Bangladesh programs they studied,
their survey found that some 18-34% of program participants in fact had wealth
that should have excluded them from participating. Hence, the use of this
eligibility criterion as a key exclusion restriction may not be appropriate
(Coleman, 1999:110).15
The methodology applied by Coleman (1999) did not require the existence and
part of his study, a unique survey which allows for the use of relatively straightforward
estimation techniques was applied for data collection. Then, the survey was done four
15
Morduch’s study in 1998 (cited in Coleman 1999: 110) found that in program village, Pitt and Khandker
marked “eligible” for households’ participation of the microcredit program as any households in program
village, consisting households that should have been excluded principally. On the other hand, they follow
exactly the rule on the eligibility criteria for marking household as eligible or not eligible in non-program
village. Thus, both “treatment” group and “control” group was not conformed each other, and it led to
overestimated results on program impact.
29
times over the course of a year, during 1995-1996, for both members and nonmembers of
the village bank in 14 villages in Northeast Thailand. Six of those villages were identified
as “control” villages that were recognized to receive NGO support for village bank within
one year after the identification. It means that there was self-selection for villagers in six
control villages as participants had already decided whether or not they want to be
membership of the village bank. The rest of eight villages were “treatment” villages of
which seven villages had a village bank for two to four years and one village started its
village bank suddenly after the first survey. The comparison between the “old” village
bank members in the eight treatment villages and the “new” village bank members in the
six “control” villages could be undertaken. In addition, the author identified precise
impact estimator as a variation of the length of time for the program availability in the
treatment villages. When nonmembers in all villages were included in the sample, this
allows for the use of village fixed effect estimation to control the possibility that the order
has corrected the selection bias and endogenous program placement. Therefore, this study
will try to take into account that bias and the author will apply method used by Coleman
(1999) to evaluate the impact of a village savings group in a semi-urban area of Laos.
30
CHAPTER 4
ANALYTICAL FRAMEWORK
This paper will to examine the impact of microfinance program by applying two
sets of indicators – economic and social indicators. To test the hypothesis that members
with a long-term participation on the savings group may have better quality of life in
terms of wealth, income and expenses, the theoretical framework, model specification
allocation, it will consider a simple model that generates an efficiency argument for
targeted credit for the rural poor. This paper will follow the framework that was
Assume that households of size n comprise two working age adults (the male
head and his wife) plus n-2 dependents. The households maximize a lifetime utility
31
U t = U (n, Qi , H i , li ) (1)
Where:
To generalize (1), each of the two adult household members, denoted by f and m, needs to
U it = λu ft + (1 − λ )u mt ,0 ≤ λ ≤ 1 (3)
In this, λ is the weight given to women’s preferences in the social welfare function of
household. The parameter λ can be thought to represent the bargaining power of female
resources. When λ =0, female preferences are given no weight and the household’s social
include “household care” activities such as preparation of food, childcare, and the
gathering of fuel.
32
H = H ( Lmh , L fh , G, F ) (4)
where,
Due to socio-cultural factors, relatively few poor women work in the wage labor
market. The reservation wage for market work is, therefore, relatively high. In addition to
this preference effect on female wage employment, workers typically must commit to a
full day’s employment even in the spot labor market. If men’s time (or that of other
household members) is a poor substitute for women’s time, and if important H-good
outputs, such as child care and food preparation, must be “produced” daily (cannot be
stored), then working a full day may entail foregoing the production and consumption of
household goods H, the indivisibility of time allocation in the wage labor market, and
high reservation wages due to cultural impediments to wage employment outside the
home all result in most women being engaged in the production of household goods H in
every period to the exclusion of employment in market activities. These effects are
magnified if λ is small and male preferences tend to favor certain kinds of H-goods
However, there are also economic activities that produce goods to sell in the
market that is not culturally frowned upon. These activities produce what we refer to as
Z-goods. These activities permit part-day labor and do not require that production occur
33
away from the home. For many Z-goods a minimum level of capital is necessary, even
though many of these production activities can be operated at low levels of capital
intensity. This minimum is often the result of the indivisibility of capital items. For
example, dairy farming requires no less than one cow, and hand-powered looms have a
minimum size. For other activities, such as paddy husking, where the indivisibility of
physical capital is not an issue, transaction costs (or the high costs of information) take
the place of the minimal level of operations. In many societies these indivisibilities may
be inconsequential, but among the rural poor of many developing countries, including
Laos, household income and wealth is so low that the costs of initiating production at
minimal economic levels are quite high. Poverty alleviation programs, such as the Rural
Works Programs, which target households by drawing them into (in-kind) wage labor,
have a comparatively small direct effect on the time allocation and productivity of
women. In addition, transportation and other transaction costs in labor markets may be so
Z = Z ( K , Lmz , L fz , A, J ) (5)
Where
K : capital in Z production,
34
J: a vector of technology parameters that affect efficiency in Z-good production
(information).
function (5) can be operated at a non-zero level when Lmz or L fz are zero, but not when
both are zero. For example, although at least one cow is required in the production of
milk, any person’s labor can be used to obtain the milk. In other examples, Kmin may
stand for the minimum information which is required to produce and market home
production.
that the present discounted value of expenditure on goods and leisure equal the present
value of all wealth, defined as assets plus the discounted present value of the time
endowments, and the two production function equations (4) and (5). Household ability to
borrow has significant influence on the time path of household consumption. Households
having very low levels of initial assets as collateral may not be able to borrow to achieve
the minimum capital requirements necessary to operate the Z-good activity. At very low
for this purpose may not be optimal because it may seriously threaten health, production
efficiency, and life expectancy, as shown in Gersovitz (1983). Therefore, for many
households, the Z-good activity is never carried out (and Lfz = 0) and women who do not
work in the wage labor market devote all their time to production of the non-market good
H and to leisure.
35
4.2 Model Specification and Methodology
• The prices of the market inputs into H-good production including the cost
complex issue. Rashid and Townsend (1994) concluded a detailed study of this issue in
and education, the health risks and intermittency of employment associated with
childbirth, and cultural barriers result in the limitation of women participation in the
formal credit market. Rashid and Townsend note that the evidence does not in itself
imply that outcomes are inefficient if, for example, women have access to other sources
36
of finance such as transfers, or if male household members obtain funds for female
household members.
household asset. The author proposes to estimate the conditional demand equation for
measured by the quantity of credit borrowed. As noted earlier, the methodology adopted
is that developed by Pitt and Khandker (1996). Consider the reduced form equation (6)
for the level of participation in one of the credit programs by household i in village j ( C ij ),
C ij = X ij β c + V j γ c + Z ij π + ε ijc (6)
where
Xij : a vector of household characteristics (e.g., age and education of household head),
Zij : a set of household or village characteristics distinct from the X’s and V’s in that they
affect Cij but not other household behaviors conditional on Cij (see below),
37
where
eijc : a non-systematic error uncorrelated with the other error components or the regressors.
The conditional demand for household outcome Yij conditional on the level of program
participation Cij is
respectively, and eijy is a non-systematic error uncorrelated with other error components
or with the regressors. If α ≠0 or θ ≠0 the errors ε ijy and ε ijc are correlated. Econometric
estimation that does not take this correlation into account will yield biased estimates of
the parameters of equation (8) due to the endogeneity of credit program participation Cij.
4.2.2 Methodology
Econometric estimation of this equation (8) will yield biased parameter estimates
if ε ijy and ε ijc are correlated and this correlation is not taken into account. According to
38
Coleman (1999), two different sources which lead to such correlation are (1) self-
selection into the savings group and (2) nonrandom program placement. He illustrated
sources of such correlation that for the first source of correlation, by considering a sample
of households drawn only from with villages with a savings group16, some households
will have selected to be savings group members, and others will have not selected to be
members. ε ijy and ε ijc will almost definitely be correlated in this sample. For example, if
there are many entrepreneurial households joining savings group, then unmeasured
“entrepreneurship” would affect both the decision to become a member and impact
measures such as income and assets. In contrast, if ε ijy and ε ijc were negatively correlated,
estimation of savings group impact would be biased downward. For example, the
relatively poor may join the savings group more than the rich who might feel stigmatized
16
In original paper of Coleman (1999) used word of “village bank” but hence use word “savings group” to
conform to this study. Actually, village bank in Coleman’s case and savings group in this study are quite
similar concept because of they both are applied from village bank model of the Foundation for
International Community Assistance (FINCA) but the village bank is much more dependent on external
fund than internal fund which contrast to the savings group. Please see Appendix B section 1.2.1 for point
of view of savings group and section 2.2.1 for its source of fund.
39
and if NGOs use such criteria to determine village bank placement, then ε ij and
μ ij will be correlated (Coleman, 1999: 113)17.
To deal with the case of correlation between ε ijy and ε ijc 18, therefore, the author
will follow the method of Coleman (1999)19 to measure the impact of savings group on
in six villages in semi-urban area of Laos (Naxaithong district). Of these, three villages
had savings groups operating for more than a year, and are called “old” savings groups.
The remaining three villages had also started operating savings groups that were in
existence for less than a year. These are called “new” savings groups (see table 5.1 of the
next chapter). Both old and new savings groups cannot be identified as “treatment”
villages and “control” villages as the case of the village banks in Northeast Thailand done
by Coleman (1999). This is a result of slight difference in the way funds are managed.
Unlike the village banks in Coleman’s case, savings groups in this case study are much
more dependent on internal funds than external funds (NGOs’support) (see more
17
The words of “village bank” and the symbols of “ ε ij ” and “ μ ij ” used in the paper of Coleman (1999)
are equivalent to the words of “savings group” and symbols of “ ε ij ” and “ ε ij ” used in this study
c y
respectively.
18
To cope with such correlation, Moffitt (1991) suggests three standard procedures: using instrumental
variables, using panel data, and assuming an error distribution of the outcome variable without treatment.
For more explanation was mentioned in the paper of Moffitt (1991: 295-305).
19
Aghion and Morduch (2005) also suggested that the method of Coleman (1999) is one of the approaches
for impact evaluation to address selection bias.
40
explanation in Appendix B under section 2.2.1). It means that some savings group
members can obtain a credit in short time (two or three days) after the establishment of
savings group by depending on internal fund (savings from members). Or some new
savings group members can access a loan quickly after self-selecting to become a
member20. However, there were many villagers who had already self-selected to become
members of savings groups, but had not obtained any credit from savings groups yet.
This was the case in both old and new savings groups, particularly among old members21
in the old savings groups who were with the savings group for more than a year. This
may be result of their lack of demand for credit because they may have enough funds to
run their activities or to smooth their consumption. Their motivation for participating in
the savings group may have been to benefit from the yearly dividends they could expect
The classification above allows the author to set a “treatment” group in which
savings group members have gained benefit from joining the savings group by either
group members have not benefited from the savings groups can be identified. The control
group of savings group households would presumably, on average, share the same
treatment group of savings group members (Coleman, 1999 and Mosley, 1997). In both
20
It is normally one or two day(s) to get a loan after becoming a member of savings group if the savings
group has enough funds and the member meet the requirements for borrowing.
21
13.98 percent of member sample (n=93) in old savings groups has never borrowed from the savings
groups since they have been a savings group member. Their membership ages varied from 11.5 months to
35.5 months.
41
old and new villages, both members and nonmembers were surveyed. With this survey
Where
Tij : a dummy variable equal to 1 if a self-selected member has already had gained
The membership dummy variable Mij can be thought of as a proxy for the
unobservable characteristics that lead households to self-select into the savings group.
For example, it captures the unobserved variables that led to the correlation across
households between ε ijy and ε ijc . The variable Tij which measures availability of the
savings group to members who have self-selected is exogenous to the household. This is
unlike the amount borrowed (which may not be exogenous with respect to the village, as
discussed below).
unobservable household characteristics, can eliminate the correlation between Tij and ε ijy
22
This equation was adopted from the study of Coleman (1999).
23
This is slightly different from Coleman’s case (1999) which he used access to program credit as
distinguish between control and treatment village but this study, the use of a gain from participation of
savings group by either obtaining a credit or receiving a dividend is to be the proxy for distinguishing
between control and treatment group.
42
due to self-selection at the household level. In addition, if the order in which villages
have savings group program placement is random with respect to unobserved village
characteristics, then efficient and unbiased estimates can be obtained with Vj as a vector
of specific village characteristic affecting Yij. However, if the order is not random with
as regressors will lead to a biased estimate of impact. This is a difference on the second
source of bias discussed above. While in this study does not control villages and
author dividing the six villages which have own savings groups in terms of different
times of establishment (that is, three old and three new savings groups). However, the
order in which villages had program support to establish a savings group may not be
random. For example, if the most dynamic villages established a savings group with the
program support before less dynamic villages, then Tij and ε ijy will be positively
correlated and δ will be biased. One method to eliminate this bias is through village
fixed effects estimation (Coleman, 1999). If the order of savings group placement is
random 24 , however, then village fixed effects estimation is still unbiased, but less
The empirical model in (10) can be improved upon by recognizing that some
treatment members have received benefit from joining savings groups longer than others.
In the six villages, the age of the savings group differed from one month to three years.
24
Unofficial information obtained from the Project’s staff and the District Lao Women’s Union at
Naxaithong city noted that the villages which have three old savings groups were target villages. Before the
establishment of savings groups in those villages, the project proponents came to the villages to discuss the
possibility of savings group establishment with local authorities of those villages. By contrast, the local
authorities in the villages with the “new” savings groups, themselves had approached the project
proponents and requested them to establish a microfinance program in their villages.
43
Of these six villages, there were members who classified to the treatment group and have
their membership ages varied as the age of the savings group. Giving that the cumulative
amount that a member can borrow grows over the life of the savings group, and that a
member can receive a dividend every twelve months, one would expect to see greater
impact in villages with older savings group. Hence the empirical model estimated, which
that determine outcomes; the treatment dummy variable Tij is replaced by MAMTij, the
numbers of months the savings group has been operating in the village. In other word,
MAMTij can be thought of as the number of months participants have gained benefits
from participation of savings groups. MAMTij is zero for members in control group and
for nonmembers in the six villages. Therefore, MAMTij is a more precise measure of
program availability than Tij. Now, δ measures the impact per month of program
availability. Like the equation (10), if the order of program placement is random with
respect to unobservable village characteristics, then efficient and unbiased estimates can
however, is not random with respect to unobservable village characteristics, then MAMTij
and ε ijy can be eliminated with village fixed effects. This specification (11) is
considerably easier to estimate (if Yij is uncensored, then OLS is appropriate), according
to Coleman (1999).
44
The regression results of the equation (11) by employing Coleman’s (1999)
presented in chapter 6. Before moving to that, survey method and data will be described
45
CHAPTER 5
SURVEY DESIGN
Many microfinance programs provide financial services to the poor and lower
income people in urban and semi-urban areas of Laos. The Women and Community’s
Empowering Project (WCEP) is one of the many programs which launched microfinance
“savings group” in three districts in Vientiane, the capital of Laos. One of these three
cities was selected for this case study (see Appendix B for the overview of the project and
this case study). The reason this case study was conducted in the Vientiane area is due to
the fact that most of savings groups operate in and around the capital. It can be seen that
of the 357 savings groups throughout the country that are being monitored by seven
agencies25, a significant number of savings groups are running in Vientiane Capital City.
Most of the groups in Vientiane are operating with the technical support of two main
bilateral projects – “Small and Rural Development Project for Women” and “Capacity
Building Project for Women and Community,” – between the Central Lao Women’s
Union, the Foundation for Integrated Agricultural Management (FIAM) and Community
the Microfinance Capacity Building and Research Project (2003), cited in Chaleunsinh,
25
Seven agencies consist of District Lao Women’s Union, District Lao Youth’s Union, District Planning
Office, District Social Welfare Office, District Finance Office, District Agriculture and Forestry Office and
branches of Agriculture Promotion Bank (Chaleunsinh, 2004).
46
2004:7). This section discusses how the survey conducted and provides a description of
the Naxaithong district which have their own savings group. At the time of survey, three
villages had just established “new” savings groups. Two of these were three months old,
one was existent for just one month (see table 5.1). Other three villages had “old” savings
groups ranging in existence from just over one year to almost three years. These were
selected from the list of savings groups provided by the project administers of projects.
Chose to the three “new” savings groups selected for this study under distance condition.
It means that the three old savings groups were not far from the three new savings groups
– under 15 Kilometer. Both members and nonmembers of the village savings group were
savings group were selected for interview and households which has no one joining the
savings group were also chosen for interview as shown in table 5.1. A random sampling
method was not employed because a quasi-census survey of member and nonmember
households was conducted. Both old and new savings groups included two kinds of
members:
26
The method for survey design was the one used by Coleman (1999) for conducting survey in 14 village
banks in Northeast Thailand as mentioned in section 3.2 of Chapter 3. However, the case of savings groups
Laos are mostly depended on internal fund which mobilized money from member deposit to lend out to
their members (see more explanation in Appendix B under section 2.2.1). Therefore, hence could not
identified the new village savings groups to be as “Control Villages” and the old village savings groups as
“Treatment Villages”; however, there are “Control” group and “Treatment” group for both old and new
village savings groups as identified in this section, which are quite different from the Coleman’s case.
47
• Members who had gained some benefit from the savings groups by either
they had been members. These members are classified as the Treatment
group.
treatment group.
Questionnaires were done in three sets. One was for households in the six villages, which
were interviewed for both members and nonmembers. The questionnaire conducted for
this study is a replication of Hulme and Mosley (1996). A similar study was conducted
for Saithani case of Lao microfinance by Sichathongthip (2004) and it was also
However, the questionnaire was slightly modified in some parts to be more suitable and
relevant for the purposes of this study. The household questionnaire contained data on
data on household assets, income, expenditure were asked for the current period (at
survey date of September 2005) as well as recall period (5 years before conducting the
survey). In each household which have a member of savings group, an adult or head of
household, who knows almost everything about the household finances, was invited for
interview27. The same method was done for households which had no members of the
savings group.
27
Most interviewees were women (wives) because, in Lao custom, most wives know most about income
and expenses of their household. As Sheck-Sandbergen and Choulamany-Khampoui (1995: 91) noted about
women in Laos, “Women are generally good at financial management and accounting because of their
social and economic experience in managing the household finances and the local economy: they are the
sellers, buyers, traders, middle-women and entrepreneurs” (quoted by Kunkel and Seibel 1997:116).
48
Table 5.1: Sample size
Note: a) this figure is assumed equal to the number of families in the savings group.
49
The second questionnaire was for collecting village information including
characteristics of the villages such as the presence of schools and prices of goods in each
village. This interview was conducted with the head of the village and members of the
The last questionnaire was for general information on savings group. It included
questions regarding the number of the group members, sources of funds, group deposit
balances, deposits and credit methods, and methodology for solving bad debts (in case).
This interview was conducted in depth for the group committee at the village level.
students of the faculty of economics and business management from the National
University of Laos, together with the author. These students were trained on how to
conduct a survey before interviewing the villagers. During survey period, the author was
the leader of the team and supervised all the students to ensure that correct information
was obtained. In addition, the author conducted the village surveys as well as in-depth
interviews with the group committees. Finally, the author conducted a follow up survey
in March 2006. This survey was targeted at collecting more data on village characteristics
and additional data on deposits, credits and other areas which the previous surveys had
not covered. Information for the last survey was mostly obtained from the group
committee and gathered by in-depth interviews with the chief of Lao Women Union at
Naxaithong district. In addition, secondary data from project documents (summary report,
progress report, savings group manual and other) were obtained from the project, Lao
50
5.2 Data description
The data used in this analysis is taken from the author’s survey in September 2005
and March 2006 as described above. All variables used for this study were drawn from
the studies of Coleman (1999 and 2002); Hulme and Mosley (1996); Pitt and Khandker
(1996 and 1998); and from Annex 1 of Gaile and Foster (1996). The main dependent
variables which represent proxies for the household’s outcomes are classified in three
main parts: household monthly expenditure, household yearly income and household
yearly income is classified to two main parts: household yearly self-employment income
household owned land and house assets, and household owned non-land and house assets.
the variable of most interest for this study is the number of months a person has been a
member of a savings group. Household characteristic variables are age, gender, education
level, household size, for example. Village characteristic variables consist of distance to
market, price of goods, having a school and being near a river, for example. More details
51
CHAPTER 6
EMPIRICAL RESULTS
This chapter presents and interprets the results of estimating a single impact
equation (11) for a wide variety of household outcomes. These outcomes include
household house asset value28, household annual self employment income from livestock,
household annual self employment income from agriculture, household monthly rental
results, some particular innovations and specifications for estimation of the equation (11)
Coleman (1999). Four innovations borrowed from his study have been incorporated in
the equation (11) for measuring the impact of the savings group:
2) It identifies a control group of members who have not benefited from the
and nonmembers, thus allowing for the use of a member dummy variable
28
This value stands for value of house with land (not empty land or land for rice field and crop plant).
Barnes (1996:4) noted that house asset is one of the physical assets representing for the wealth of
household.
29
For other proxies representing for household outcomes as shown in Appendix A-table 1-4 are not
reported in this paper. According to the econometric exercise, those outcomes do not show significant
correlation with the regressor of interest (months of savings group membership).
30
This was used by Pitt and Khandker (1996&1998); Pitt et al. (1999); Khandker et al. (1998); Mckernan
(2002); Coleman (1999&2002).
52
to be a proxy for unobservable differences between members and
nonmembers;
3) It uses the value of land owned by household five years before this survey
4) It uses the length of time that the savings group has been in a village to
In addition, this study uses four specifications from Coleman (1999) to illustrate
the importance of the four innovations to correct the bias resulting from self-selection and
1) First is the “correct” specification which use village fixed effects and
include a member dummy variable and variable for land value owned by
2) Second is the specification which is identical to the first but this includes a
random, and the author was fortunate enough to choose all the relevant
31
Proportion of land value is 91.38 per cent of household wealth in this sample and land value is an
excellent proxy for wealth which is similar to Coleman’s (1999) case. This land value comes from the
value of empty land or land for agriculture or any land which is not for house building. According to
Coleman (1999), collecting data on land owned five years before the surveys is relatively easy. Because
land transactions tend to be large and important for a household, yet relatively infrequent, households can
easily recall land transactions made in the previous five years, and land owned five year earlier (and its
value) can be deduced. Of course, collecting similar data on other assets is not feasible without surveying
over several years.
32
These village characteristics include dummy variable for that village has either a pig pond which has
water throughout the year or be near river; dummy variable for that village has paved road or near main
road (Km 13 road); dummy variable for that village has primary school grade5; a distance from village to
main market; a price of traditional chicken (Gailard) per Kg; and daily wage for construction.
53
observable village characteristics, then the estimation of nonfixed effects
program placement is not random, or the author chose the wrong village
inconsistent.
3) Third is “naive” estimates which ignore the first two innovations. For
example, the naïve estimates use specific village characteristics rather than
fixed effects, and they leave out the member dummy variable.
4) Fourth is “super-naive” estimates which are identical to the third but also
ignore the third innovation by leaving out the variables for land value
uncensored, the method of ordinary least squares (OLS) is applied for estimating the
equation (11). In addition, the White test is applied to test for heteroskedasticity which
lead to unbiased estimators of OLS. Then, the generalized least squares estimation (GLS)
The regression result of the equation (11) which covered all above methods will
be discussed bellow under categories of the impact on household house assets, self-
33
According to Coleman (1999), the naïve models correspond to the models most commonly used to
measure impact, which ignore selection bias, endogenous program placement, and prior wealth.
54
6.1 Impact on household house asset
all four specifications, mentioned above, were applied to the equation (11). Four sets of
regression results for impact of savings group on household house asset value,
significant test of explanatory variables shows strongly significant evidence at the 1 per
cent level for all four methods regressions. All four specification regressions show that
the savings group has positive and significant impact on household asset value. It can be
seen that both fixed effect estimation and nonfixed effect estimation demonstrate reliable
explanatory of the monthly savings group membership with large and significance at the
5 per cent level (292,097; p = 0.0493) and at the 10 per cent level (292,097; p = 0.0522)
respectively. In contrast, the regression results of both naïve and super-naïve models
which ignore the first two and the first three innovations respectively, also show
significant impact with large proportion of coefficients of the month of savings group
member at the 1 per cent level as (335,021; p = 0.0066) and (358,260; p = 0.0041)
respectively. These results are in contrast with those of the study of Coleman (1999 &
Table 5 (Appendix A) shows that the coefficient of the member dummy variable
in the household house asset value is insignificant (1,481,225; p = 0.6816), indicating that
preferences, etc.) are of little consequence. This is consistent with the result of the
coefficient on member dummy variable and the house value in the fixed effect model
found by the Coleman (1999 & 2002). Therefore, in the fixed effect model, there is no
55
correlation between the member dummy variable and the household house asset value.
In addition, the coefficient on the value of household owned land 5 years ago is
positive but it is statistically insignificant at least at the 10 per cent level against a two-
value level, the fixed effects and nonfixed effects estimations show those coefficients as
coefficients are acceptable at the 16.83 per cent and 17.1 per cent level. It means that the
initial wealth of household could slightly increase the value of household house asset.
Nevertheless, the coefficient of female-owned land value 5 years ago is positive and
statistically significant at the 1 per cent level to women’s wealth in the study of Coleman
(1999).
One might expect the women who are the head of a household to participate more
actively in the savings group than women who are not the head of household. However,
the coefficient on this variable and the household house asset value in all four
specifications regressions is insignificant at least 10 per cent level. This may be explained
by the fact that 52 per cent of women who are the household head are either single,
widowed, divorced. This implies that there was no male adult in the households to help
with any household activities, particularly economic activities. According to Kunkel and
Seibel (1997:106), in Lao Loum group 34 , there is a division of labor, but not fixed,
34
As Kunkel and Seibel (1997:6) note, “The ethnography of Laos comprises the lowland Lao Loum who
grow paddy in the river valleys along the Mekong and its tributaries but also include the upland Tai Dam,
who are non-Buddhist; the upland Lao Theung many of which practice slash-and-burn agriculture in the
hills above the valleys and on the mountain slopes; and the mountain-top Lao Soung who have long
resisted government efforts at resettlement and the substitution of new for old cash crops.” In this case
study, all sample come from Lao Loum group.
56
between the two sexes in households for doing household work, agriculture work,
livestock, collection of forest products and handicrafts. Many of roles of women and men
are overlap.
(or are entrepreneur) have positive significant increase of household house asset value. It
can be seen that the coefficient of gender variable is positive and significant in relation to
household house asset value in all four estimation models. For example, there is positive
correlation between gender variable and household house asset value (14,021,407; p =
0.093), corresponding to the fixed effect estimation model (see Appendix A: Table 5).
Education level is highly significant in all four estimation models at the 5 per cent
level. For example, in case of fixed effect estimation model, the coefficient on maximum
years can be considered as a proxy for human capital, then this result likely stands for the
1999:120). Coleman (1999) also discovered the positively significant correlation between
education level for both females and males and women’s wealth but they were shown in
Age of the individuals is totally positive significance at the 5 per cent level,
corresponding to the four specification models. In case of the fixed effect estimation
model, for example, the coefficient on the age of individuals is largely significant
(312,418; p = 0.023). It could be interpreted that the older of the individuals in the
households who participate in the savings group, the more significant is the increase in
their household house asset value. This result was also found by Coleman (1999). He
57
revealed that the coefficient on age-sex categories with women age 40 to 59 and women
age 60 and over were positive and significant at the 5 per cent and 1 per cent levels
respectively to women’s wealth. However, his result was shown by the super-naïve
People, who have run their business or family activities for a long time, have been
increasing their household wealth. More experience in running the business or family
knowledge and experience in that field. It can be seen that the coefficient on number of
months doing business are significant at the 1 per cent level to household house asset
value, corresponding to the four estimation models (see Appendix A: Table 5).
It is not surprising that the influence of the number of relatives in the village on
household house asset value is positive and significant at the 1 per cent level for the four
estimation models. For example, the coefficient on the number of relatives in the village
to the household house asset value is large and significant (1,552,376; p = 0.0001), in
case of the fixed effects estimation model. The number of relatives represents village
relationships that would help each other when facing serious situations including self-
in household has a large and statistically significant impact on household house asset
value at the 1 per cent level for the four estimation models. It is statistically significant
(12,703,787; p = 0.0026) in case of the fixed effect estimation model, for example.
Similarly, Coleman (1999) found large positive correlation between the independent
58
variable of having a village chief or assistant chief in the household and women’s wealth
One might expect that living in the village that has paved roads or been a near
main road may improve household status more than living in the village does not have
these advantages. The nonfixed effects, naïve and super-naïve models were negative
effect of a variable for village characteristic – village has paved road or been near main
road – on household house asset value with statistically significant level at 5 per cent as
shown in Table 5 (Appendix A). This result is somewhat anomalous and difficult to
explain. However, overall, the empirical results show that participation of savings group
has been increasing household asset value by employing all four estimation models.
impact categories: household annual self employment income from livestock, household
annual self employment income from agriculture, and household monthly rental
expenditure35.
By regressing the equation (11) with the four estimation models, the results of
regressions for the effects of savings group on household yearly self employment income
from livestock are shown in Table 6 (Appendix A). The fixed effect, nonfixed effects,
naïve and super-naive estimates are all positive for the coefficient on the month of
35
Most of rental expenditure comes from rental of self-employment activities such as rental of rice field for
planting rice, rental on shop for trading and rental on garage for vehicles fixing service.
59
savings group membership, implying that savings group participation by a member of the
household increases the yearly income of household livestock production. Only two
estimation models, fixed effects and nonfixed effects, produce statistically significant for
that coefficient at the 10 per cent level, (19,962.47; p = 0.0606) and (19,962.47; p =
0.0640) respectively. In contrast, those results were not significant in the study by
The size of household also has a positive and significant effect on household
annual self employment income from livestock. Table 6 (Appendix A) showed all
household from livestock production by employing all four estimation models, and these
coefficients are statistically significant at the 1 per cent level. It implies that more
member in the household could increase the annual income of household from livestock
production. For example, in case of the fixed effects estimation model, increase in
household size by one person could push up the household yearly income from livestock
Household which had a chief or member of the savings group committee had a
large increase in the household yearly income from livestock production. It can be seen
that all four estimation models result in the positive coefficients of the variable for
household which has chief or member of savings group committee, which are statistically
In addition, Table 6 (Appendix A) shows that the fixed effects estimates produce
positive coefficients on the number of civil servants in the household which is significant
60
6.2.2 Impacts on household annual self employment income from
agriculture
agriculture production is also done employing equation (11) with the four specifications.
Table 7 (Appendix A) shows that all four estimation models result in significant negative
correlation between the month of savings group membership and the yearly income of
household from agriculture production. The coefficients of the month of savings group
membership in the four models are significant at the 1 per cent level. However, the study
of Coleman (1999) did not find any significant relationship between the month of village
models.
membership and the household income from agricultural self-employment activities, this
result is still ambiguous. It is difficult to conclude that the participation of savings group
decreases the household income from the agricultural self-employment activities, because
such a negative relationship of the coefficient may have other reasons behind it. One
which fluctuate throughout the year. Another possibility is related to underestimated real
data of the yearly household collecting only from a part of agricultural products sold in
the markets that are excludes the value of agriculture products for the owner’s household
consumption and those reserved for reproducing (cultivating). The annual household
61
therefore, is lower than the real value of the agriculture products. Some sample
households had a zero value of household income from the agriculture products because
of the non-sale of agricultural products (only used for household consumption), even
though they produced those products. This was particularly the case for households who
income from household agricultural production. Its coefficient is large and significant
(286,830.8; p = 0.0808) for the fixed effects estimation model and (286,830.8; p =
0.0847) for the nonfixed effects estimation model. This implies that unobservable
differences between member and nonmembers have large consequences. In other word,
being member of savings group can increase the yearly income of household agricultural
Having a female household head has a negative and significant relationship to the
models. Its coefficient is statistically significant at the 1 per cent level for all cases of the
estimations as shown in Table 7 (Appendix A). This result shows that household head
who is not female crucially increase the annual income of household agricultural
production. This may be true because, in rice plantation, heavy tasks like ploughing or
harrowing are mainly men’s work, while it is the women who select the seed, uproot
36
Most of them did not sell their rice, only for own consumption, after payment of the rental fee to landlord
by some amount of rice, regarding to the agreement between landowner and leasee.
62
The size of the household and the number of months doing business has a positive
can be seen from the results of all four estimation models. Their coefficients are
statistically significant at the 1 per cent level as shown in Table 7 (Appendix A).
The number of generations that the family has been in the village has a positive
significant at the 5 per cent level. It means that more number of generations’ family in
village can help agriculture work to push more products, and then household income may
increase.
It is not surprising that the value of household owned land 5 years ago or initial
wealth has positive effect on the yearly income of household agricultural production
Focus on the variable of village characteristic, the distance from the village to
main market has a negative effect on the annual income of household agricultural
production. This is true in reality because if goods, especially agricultural products, are
located far away from the market (city market), their price are lower than the ones sold in
household monthly rental expenditure corresponding to the fixed effects, nonfixed effects,
naïve and super-naïve models. All four models indicate the positive correlation between
the month of savings group membership and the household monthly rental expenditure.
63
Its coefficient is significant at the 5 per cent level for the first three specifications and at
the 1 per cent level for the super-naïve model. This result could be interpreted as showing
that the participation in a savings group leads to increase in household monthly rental
expenditure. In other words, the savings group participation supports the persons who
Education level of individuals in the household also has a positive and significant
at the 5 per cent level for all four estimation models. The result could be explained by the
fact that people who achieve high education level could be more confident to do their
business in new ways walkout investing their own capital (especially physical asset).They
The impact of savings group on education can be seen from household monthly
household monthly educational expenditure by regressing the equation (11) with respect
to the four specifications. The month of savings group membership has positive relation
per cent level for the four estimation models. This relationship indicates that the
household. It can be seen that being member of savings group for one more month could
raise the household monthly education expenditure by 5,670 Kip, in case of the fixed
64
effects model, for example. One can say that the people joining savings group can
support for their children’s schooling. However, this result could not be found in the
Turning to village characteristic variables, the village which has a primary school
until grade 5 has a positively significant effect on the household monthly education
expenses. Table 9 (Appendix A) shows that the coefficient of this variable with
statistically significant level at the 10 per cent, corresponding to the nonfixed effects,
naïve and super naïve models. This result implies that a village which has a primary
school until grade 5 can support more children to continue their schooling until higher
education level.
household level. This is seen by applying the fixed effects, nonfixed effects, naïve and
super-naïve estimation models. These household impacts are shown in three categories,
some theoretically fundamental relationship results might present the adverse effects
from such as the negative relationship between the months of savings group membership
and the household income from agricultural self-employment activities. This is more
However, this paper has some limitations. First, even though this applied the
least squares (WLS) estimations, there may be correlation among independent variables.
This may lead to biased estimations of the impact on household outcomes. Second, there
may be endogenous issue in variables because this study did not cover a test for the
65
endogeneity. Third, this study did not take into account the spillover effects to
nonmembers in the six villages. Fourth, the values of data on household assets, incomes
and expenditures are nominal. Fifth, the use of cross-section data to evaluate the impact
of the savings group, may show only the short term effect and may not predict the long
term impact of savings group which may be possible to ascertain by using panel data.
66
CHAPTER 7
CONCLUSION
Research studies have showed that microfinance has significant impact on assets, income,
expenditure, educational status, health as well as gender empowerment. In this paper, the
area of Laos were estimated by application of the survey design and research
methodology of Coleman (1999) taking into account bias for self-selection and
endogenous program placement which was not corrected in the previous studies relating
to Laos. The survey sample included members and nonmembers in six villages that have
own savings groups. These savings group were in operation for various lengths of time.
Members who experienced benefits from joining the savings group by either obtaining a
credit or receiving a dividend are called the “treatment” group, and those who have not
benefited from the groups are called the “control” group. All members of the “control”
group were relatively new members with an average membership of 2.2 months. In order
to demonstrate the importance of selection bias correction, the paper compared the results
of the “correct” empirical specification to those of the three other specifications which do
67
expenses by applying four empirical specifications. The empirical results illustrate that
the participation in the savings groups has large positive and significant effects on all of
these outcomes, except household agriculture production income. This may be explained
by the fluctuation of seasonal agricultural prices, and under reporting of the real value of
household agricultural income. This is because data collected pertain only to income
from agriculture products which were sold in the markets, not those used for self-
consumption.
The results of this study differ from those of Coleman (1999). He did not find
significant impact of village bank loan on household outcomes once corrections were
made for self-selection and endogenous program placement. Only the more “naive”
This difference in the results between this study and Coleman’s (1999) study may come
from the different contexts of these two cases, even though these two cases follow the
same village bank model (see Appendix B: section 2.2.1). Regarding to Coleman’s
37
BAAC stands for the semi-statal Bank for Agriculture and Agricultural Cooperatives (Coleman, 1999:
111).
68
lot of money to a village household. They are also the limits used in Northeast
Thai villages, and they are arguably too low. On the other hand, the significant
number of members who had worked themselves into debt by borrowing without
having identified a productive activity to invest in points to the need for project
field staff to redouble efforts to stress the need to invest the loans productively
(Coleman, 1999:133).
In contrast to Thailand, Laos is one of the poorest countries in East Asia with an
estimated per capita income of US$ 390 in 2004. Real GDP grew by an annual average
rate of 6.3 per cent in the 1990s and was 7 per cent in 2005 (World Bank Vientiane
Office, 2006). In terms of access to financial services, about one million economically
However, almost three quarters cannot reach them. Approximately 300,000 people
recently accessed loan and savings services. Only 21 per cent have access to microcredit
from the formal sector, 33 per cent are dependant on the semi-formal sector and project
initiatives and the rest 46 per cent are obtaining financial service from the informal sector.
In this survey sample, only 6 per cent and 4 per cent of those sample surveyed access
could credit at low interest rates and make deposits with APB respectively (Appendix B:
Table 5-6). These may be factors that lead to the villagers’ need for a credit for
productive purpose from the savings group. This may, therefore, lead to have a
This paper also has some limitations. First, even though this applied the
least squares (WLS) estimations, there may be correlation among independent variables.
This may lead to biased estimations of the impact on household outcomes. Second, there
may be endogenous issue in variables because this study did not cover a test for the
69
endogeneity. Third, this study did not take into account the spillover effects to
nonmembers in the six villages. Fourth, the values of data on household assets, incomes
and expenditures are nominal. Fifth, the use of cross-section data to evaluate the impact
of savings group, may show only the short term effect and may not predict the long term
impact of savings group which may be possible to ascertain by using panel data.
The use of panel data for conducting a follow up survey for an impact analysis is
recommended area for further study. This will help in dealing with problems such
However, this paper’s findings have several important implications. Firstly, the
large positive impact savings group has on household asset suggest that microfinance
programs may improve household status in term of wealth. Secondly, the positive
agriculture in terms of rental on rice fields, suggest that the savings group program may
be a viable strategy for the poverty eradication. This is consistent with the National
Growth and Poverty Eradication Strategy (NGPES) (2004: 65) of the Government of Lao
PDR which recognizes the importance of microfinance and has placed it as the one of the
high priority projects for the agriculture and forestry development plan. Thirdly, the great
suggests that microfinance program may be one viable strategy to reach the millennium
70
References
Materials in English
Asian Coalition for Housing Rights, 2005, Laos Grassroots Savings Network: Part 2,
http://www.achr.net/Countries/Laos/LaoSavingss2.htm.
Bagchi, Palash K., Sarah Wood, and Phetdavone Chaleunsouk, 2002, “Market Research
Study: A Sector Analysis Update for Microfinance in Lao PDR,” Lao PDR:
Bank of Thailand, 2006, Table 89: Rates of Exchange of Commercial Banks in Bangkok
/databank/EconData/EconFinance/Download/Tab89.xls.
Bank of the Lao PDR, 2002, The Banking and Financial Sector of Lao PDR: Financial
Barnes, Carolyn, 1996, Assets and The Impact of Microenterprise Finance Programs,
71
Chowdhury, A.M.R., and Bhuiya, A. 2004, “The Wider Impacts of BRAC Poverty
16: 369-386.
Coleman, Brett E., 2002, “Microfinance in Northeast Thailand: Who Benefits and How
Coleman, Brett E., 1999, “The impact of group lending in Northeast Thailand,” Journal
Copestake, J., 2002, “Inequality and The Polarizing Impact of Microcredit: Evidence
Copestake, J., Bhalotra, S., and Johnson, S., 2001, “Assessing the Impact of Microcredit:
Gaile, L.Gary and Jennifer Foster, 1996, Review of Methodological Approach to the
Gersovitz, Mark, 1983, “Savings and Nutrition at Low Incomes,” Journal of Political
Goetz, A.M., & Gupta, R.S. 1996, “Who Takes the Credit? Gender, Power, and Control
(1): 45-63.
72
Greene, William H. 2000, Econometric Analysis, Upper Saddle River, New Jersey:
Prentice-Hall Press.
Hashemi, S.M., Schuler, S.R., Riley, A.P., 1996, “Rural Credit Programs and Women’s
Heckman, James J. and Richard Robb, 1985, “Alternative Methods for Evaluating the
the Gender of the Borrower and the Delivery Model Matter?” Journal of
Hulme David and Mosley Paul, 1996, Finance Against Poverty, 1rst and 2nd Vols.
London: Routledge.
Khandker, S.R., Samad, H.A., and Khan, Z.H. 1998, “Income and Employment Effects of
Khandker, Shahidur R, 2003, “Micro-Finance and Poverty: Evidence Using Panel Data
Washington DC.
Kunkel, C.R. and H.D. Seibel, 1997, Microfinance in Laos, Bangkok, Thailand: Asia
73
Kyophilavong, Phouphet and Chansathith Chaleunsinh, 2005, “The Impact of the Savings
Group and Its Service Issues in Laos,” Lao Journal of Economics and Business
Perspective, Washington, D.C.: World Bank, Sustainable Banking with the Poor
project.
Microfinance Capacity Building & Research Programme, 2005, Rural & Microfinance
Statistics in Lao PDR 2004, Vientiane, Lao PDR: National Economic Research
Montgomery, R., Debapriya Bhattacharya, and David Hulme, 1996, “Credit for The Poor
Finance Against Poverty. David Hulme and Paul Mosley, eds. London: Routledge.
Morduch, J. 1998, “Does Microfinance Really Help the Poor? New Evidence from
from http://www.wws.princeton.edu/~rpds/downloads/morduch_microfinance
_poor.pdf.
74
Mosley, Paul, 1997, “The Use of Control Groups in Impact Assessments for
Microfinance,” Social Finance Unit Working Paper No. 19, The International
Mosley, Paul, 2001, “Microfinance and Poverty in Bolivia,” The Journal of Development
National Economic Research Institute, 2004, Rural & Microfinance Statistic in Laos
National Growth and Poverty Eradication Strategy, 2004, Vientiane, Lao PDR., June.
Pitt, M.M., and Khandker, S. R., 1996, “Household and Intrahousehold Impact of the
Pitt, M.M., Khandker, S.R., Mckernan, S.M., & Latif, M.A, 1999, “Credit Programs for
The Poor and Reproductive Behavior in Low-Income Countries: Are the Reported
21.
Pitt, Mark M., and Shahidur R. Khandker, 1998, “The Impact of Group-Based Credit
Rashid, Mansoora and Robert M. Townsend, 1994, “Targeting Credit and Insurance:
75
Robinson, Marguerite S, 2001, The Microfinance Revolution, Sustainable Finance for the
Field and Offices: Irrigation in Laos. Gender Specific Case Studies in Four
Sophia University.
Slover, Curtis, Jon Wynne Williams, Jose Garson, and Eric Duflos, 1997, Microfinance
United Nations Capital Development Fund, 2001, Feasibility Study Mission Report:
LAO/96/020, 25th January, Retrieve July 7, 2006, from United Nations Capital
microfinance/technical_review_reports/FEA.pdf.
South-Western.
World Bank Vientiane Office, 2006, “Lao PDR Economic Monitor,” Vientiane, Laos,
76
Yunus Muhammad, 2001, Banker to The Poor: The Autobiography of Muhamad Yunus,
Limited.
77
Materials in Lao
Empowering Project, Savings Group Manual, 1st ed., Vientiane, n.d, Cooperative
£¤¡¾−¦‰¤À¦ó´£¸¾´À¢˜´Á¢¤¦¿ìñ®Á´È¨ò¤Á콧÷´§ö−, 쾨¤¾−¡¾−¥ñ©ª˜¤¯½ªò®ñ©Â£¤
Institute (Thailand)]
78
Á´È¨ò¤ ¦.¯.¯ 쾸 Áì½ ¦½«¾®ñ−²ñ©ê½−¾§÷´§ö− (¯½Àê©Äê). [Lao Women’s
Savings Group in Lao PDR, Vientiane, n.d, Lao Women’s Union: Lao PDR and
79
Appendix A
80
Appendix A
Household total yearly self employment 11,592,111 5,475,000 196,000,000 0 25,294,651 251
income
Household yearly wage & salary income 2,205,797 0 24,000,000 0 3,799,600 251
Household yearly income from remittance 407,822 0 19,068,600 0 1,704,379 251
Household yearly rental income 79,084 0 10,800,000 0 738,221 251
Household yearly monetary items income 887,139 0 213,000,000 0 13,461,641 251
Household yearly other income 21,514 0 3,600,000 0 253,644 251
Household total yearly non-self employment 3,601,356 500,000 213,000,000 0 13,979,828 251
income
Household yearly total income 15,193,467 8,200,000 213,000,000 380,000 28,634,965 251
81
Appendix A
82
Appendix A
83
Appendix A
84
Appendix A
Household total yearly self employment 11,487,380 6,160,000 194,000,000 0 23,500,748 131
income
Household yearly wage & salary income 2,327,977 0 19,720,000 0 3,842,135 131
Household yearly income on remittance 448,352 0 19,068,600 0 1,945,576 131
Household yearly rental income 102,290 0 10,800,000 0 954,863 131
Household yearly monetary items income 45,802 0 6,000,000 0 524,222 131
Household yearly other income 27,481 0 3,600,000 0 314,534 131
Household total yearly non-self employment 2,951,902 400,000 26,068,600 0 4,678,700 131
income
Household yearly total income 14,439,282 8,520,000 194,000,000 1,000,000 23,505,613 131
85
Appendix A
86
Appendix A
87
Appendix A
88
Appendix A
89
Appendix A
90
Appendix A
91
Appendix A
92
Appendix A
Household total yearly self employment income 13,297,368 5,000,000 196,000,000 0 32,677,643 68
Household yearly wage & salary income 2,227,206 0 24,000,000 0 4,153,388 68
Household yearly income from remittance 450,569 0 10,000,000 0 1,550,881 68
Household yearly rental income 8,088 0 400,000 0 51,551 68
Household yearly monetary items income 3,156,941 0 213,000,000 0 25,853,716 68
Household yearly other income 0 0 0 0 0.00 68
Household total yearly non-self employment 5,842,804 450,000 213,000,000 0 25,914,373 68
income
Household yearly total income 19,140,172 8,100,000 213,000,000 380,000 40,947,644 68
Independent variables:
Months as VSG member 0 0 0 0 0.00 68
Does household has a VSG member?(0/1) 0 0 0 0 0.00 68
93
Appendix A
94
Appendix A
95
Appendix A
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Coefficient Std. Error Coefficient Std. Error Coefficient Std. Error
Error
Months as VSG 292,097** 147,784 292,097* 149,683 335,021*** 122,254 358,260*** 123,456
member
Does household 1,481,225 3,606,033 1,481,225 3,652,365
have a VSG
member?(0/1)
Sex of -8,395,409 6,494,524 -8,395,409 6,577,969 -8,192,279 6,446,844 -8,324,504 6,502,591
household head
(female=1)
Gender of 14,021,407** 6,760,261 14,021,407** 6,847,120 14,277,586** 6,841,554 10,800,449* 6,236,708
individuals
(entrepreneur)
(female=1)
Maximum 854,694** 422,396 854,694** 427,823 875,203** 4,152,112 912,698** 405,066
education of
individuals
(entrepreneur)
(years)
Household size 1,037,618 752,418 1,037,618 762,086 1,031,433 761,675 1,141,685 753,676
Age of 312,418** 136,471 312,418** 138,225 317,848** 136,362 347,865*** 137,941
individuals
(entrepreneur)
(years)
96
Appendix A
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Coefficient Std. Error Coefficient Std. Error Coefficient Std. Error
Error
Number of 29,502*** 11,177 29,502*** 11,321 29,811*** 11,347 33,317*** 11,108
months doing
business
Number of 843,836 1,191,177 843,836 1,206,481 796,147 1,209,852 542,343 1,190,404
Generations of
family in village
Number of 1,552,376*** 387,633 1,552,376*** 392,613 1,548,088*** 392,040 1,544,427*** 381,940
relatives in
village
Are you 12,703,787*** 4,169,217 12,703,787*** 4,222,785 12,597,429*** 4,225,101 12,995,561*** 4,189,169
member or head
of the group
committee?
(0/1)
Number of civil 5,058,192 3,566,208 5,058,192 3,612,029 5,216,180 3,483,950 5,351,551 3,463,556
servant in
household
Value of 0.0688 0.0498 0.0688 0.0504 0.0697 0.0502
household
owned land 5
years ago
97
Appendix A
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Coefficient Std. Error Coefficient Std. Error Coefficient Std. Error
Error
Village has -44,768,692 36,726,790 -45,892,240 36,782,065 -47,125,621 36,182,599
either pig pond
which has water
throughout the
year or be near
river (0/1)
Does village -17,908,249** 7,655,365 -18,358,229** 7,784,479 -18,674,677** 7,906,479
have paved road
or near main
road (Km 13
road)? (0/1)
Does village 45,390,649 38,241,483 46,212,441 38,344,587 47,538,868 3,764,1126
have primary
school up to
grade5? (0/1)
Distance from 583,219 424,715 599,591 416,257 585,607 424,001
village to main
markets
Price of -258 1,783 -429 1,846 -171 1,841
traditional
chicken
(Gailard) per
Kg
98
Appendix A
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Coefficient Std. Error Coefficient Std. Error Coefficient Std. Error
Error
Daily wage for -1,018 1,542 -886 1,613 -977 1,613
construction
Note: the superscripts ***, ** and * denote rejection at 1 per cent, 5 per cent and 10 per cent critical values.
99
Appendix A
Table 6: Impact of savings group on yearly self-employment income from livestock - GLS.
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Coefficient Std. Coefficient Std. Coefficient Std.
Error Error Error Error
Months as VSG 19,962* 10,589 19,962* 10,725 5,374 6,546 5,948 6,388
member
Does household have -557,276 358,369 -557,276 362,974
a VSG member?(0/1)
Sex of household -300,623 207,914 -300,623 210,585 -368,213* 204,348 -371,531* 202,203
head (female=1)
Gender of individuals 80,203 845,785 80,203 856,652 -6,467 855,017 -84,635 861,953
(entrepreneur)
(female=1)
Maximum education 12,190 33,842 12,190 34,277 2,017 33,190 4,484 33,169
of individuals
(entrepreneur) (years)
Household size 318,013*** 97,539 318,013*** 98,792 306,585*** 95,545 310,764*** 95,568
Age of individuals 4,370 10,151 4,370 10,281 1,298 9,339 2,549 9,296
(entrepreneur) (years)
Number of months -809 818 -809 828 -761 806 -689 792
doing business
Number of 107,168 83,641 107,168 84,716 110,511 78,823 110,934 78,738
Generations of family
in village
Number of relatives 46,844 32,868 46,844 33,290 48,340 31,638 49,922 32,272
in village
100
Appendix A
Table 6: Impact of savings group on yearly self-employment income from livestock – GLS (continued)
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Coefficient Std. Coefficient Std. Coefficient Std.
Error Error Error Error
Are you member or 1,378,544*** 483,964 1,378,544*** 490,183 1,413,605*** 473,251 1,445,757*** 479,883
head of the group
committee? (0/1)
Number of civil 413,843.2* 249,040.7 413,843.2 252,240.5 389,296 246,407 395,150 244,608
servant in household
Value of household 0.0023 0.0029 0.0023 0.0029 0.0023 0.0027
owned land 5 years
ago
Village has either pig -3,014,492 2,745,199 -2,626,708 2,695,507 -2,669,113 2,678,944
pond which has water
throughout the year
or be near river (0/1)
Does village have -654,752 684,148 -481,329 656,940 -493,312 659,751
paved road or near
main road (Km 13
road)? (0/1)
Does village have 2,453,660 2,861,017 2,144,790 2,823,562 2,186,486 2,806,690
primary school
grade5? (0/1)
Distance from village -16,485 54,007 -21,839 53,026 -22,598 52,962
to main markets
Price of traditional -99.92 117 -39 99 -31.38 99.5
chicken (Gailard) per
Kg
101
Appendix A
Table 6: Impact of savings group on yearly self-employment income from livestock – GLS (continued)
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Coefficient Std. Coefficient Std. Coefficient Std.
Error Error Error Error
Daily wage for 83 69 39 56 35 56
construction
F-statistic= 2.296443 F-statistic=2.296443 F-statistic=2.281757 F-statistic=2.388660
Prob(F-statistic)= Prob(F-statistic)= Prob(F-statistic)= Prob(F-statistic)=
0.002577 0.002577 0.003352 0.002513
R-squared=0.151228 R-squared=0.151228 R-squared=0.142720 R-squared=0.140397
Note: the superscripts ***, ** and * denote rejection at 1 per cent, 5 per cent and 10 per cent critical values.
102
Appendix A
Table 7: Impact of savings group on household yearly self-employment income from agriculture - GLS.
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Coefficient Std. Coefficient Std. Coefficient Std.
Error Error Error Error
Months as VSG -28,206.57*** 9,286.57 -28,206.57*** 9,405.89 -19,530.14*** 7,505.15 -20,080 ***
7,381.74
member
Does household have 286,830.8* 163,582.4 286,830.8* 165,684.2
a VSG member?(0/1)
Sex of household -541,902*** 108,493 -541,902*** 109,887 -512,509*** 107,429.6 -486,574*** 107,728
head (female=1)
Gender of individuals 72,762 129,788 72,762 131,455.9 103,554.6 128,713 74,531 127,055
(entrepreneur)
(female=1)
Maximum education -41,017.54** 19,608.96 -41,017.54** 19,860.9 -39,569.5** 19,779.25 -28,725.78 17,799
of individuals
(entrepreneur) (years)
Household size 74,184.43*** 25,956.19 74,184.43*** 26,289.69 74,259*** 25,928 80,356*** 25,993
Age of individuals 6,792.35 4,806.29 6,792.35 4,868.04 5,987.76 4,768.41 7,609* 4,585
(entrepreneur) (years)
Number of months 2,310.43*** 573.26 2,310.43*** 580.63 2,347.08*** 579.52 2,375.99*** 572.196
doing business
Number of 137,675.9** 58,040.65 137,675.9** 58,786.38 138,985** 57,809 127,145.7** 56,916
Generations of family
in village
Number of relatives 11,847.96 21,677.13 11,847.96 21,955.64 11,319.47 22,153.05 11,529.7 22,208.8
in village
103
Appendix A
Table 7: Impact of savings group on household yearly self-employment income from agriculture – GLS (continued)
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Coefficient Std. Coefficient Std. Coefficient Std.
Error Error Error Error
Are you member or 536,173.8 563,871 536,173.8 571,115.9 506,895 569,192.6 507,812.4 567,530
head of the group
committee? (0/1)
Number of civil 82,783.2 118,974.4 82,783 120,503 107,797.9 115,761.5 158,546 105,499
servant in household
Value of household 0.001251*** 0.000365 0.001251*** 0.00037 0.001144*** 0.000367
owned land 5 years
ago
Village has either pig -1,348,716 5,157,754 -1,576,873 5,166,868 -1,521,957 5,156,553
pond which has water
throughout the year
or be near river (0/1)
Does village have -1,464,704 3,444,240 -1,550,032 3,444,890 -1,536,444 3,437,276
paved road or near
main road (Km 13
road)? (0/1)
Does village have 4,407,984 8,395,579 4,576,076 8,394,287 4,510,155 8,377,608
primary school up to
grade5? (0/1)
Distance from village -118,734** 59,639.55 -116,338** 59,163.12 -116,370** 59,044.5
to main markets
Price of traditional -697.26 998.98 -724.56 999.12 -720.7 996.85
chicken (Gailard) per
Kg
104
Appendix A
Table 7: Impact of savings group on household yearly self-employment income from agriculture – GLS (continued)
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Coefficient Std. Coefficient Std. Coefficient Std.
Error Error Error Error
Daily wage for 637.56 792.33 663.61 793.01 656.64 791.38
construction
F-statistic= 1.492664 F-statistic= 1.492664 F-statistic=1.537622 F-statistic=1.607735
Prob(F-statistic)= Prob(F-statistic)= Prob(F-statistic)= Prob(F-statistic)=
0.093412 0.093412 0.082866 0.067655
R-squared= 0.103790 R-squared= 0.103790 R-squared=0.100871 R-squared=0.099043
Note: the superscripts ***, ** and * denote rejection at 1 per cent, 5 per cent and 10 per cent critical values.
105
Appendix A
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Error Coefficient Std. Coefficient Std. Error Coefficient Std.
Error Error
Months as VSG 138.904** 60.75 138.904** 61.53 144.28** 45.69 144.421*** 45.613
member
Does household has a 175.558 1,355 175.558 1,372
VSG member?(0/1)
Sex of household 2,153 1,313 2,153 1,330 2,127.22 1,358.16 2,120.69 1,352.03
head (female=1)
Gender of individuals 514 1,036 513.95 1,049.55 460.495 1,024.501 367.014 1,024.34
(entrepreneur)
(female=1)
Maximum education 483.38** 204.63 483.38** 207.25 488.83** 207.36 498.64** 208.93
of individuals
(entrepreneur) (years)
Household size -164 439.83 -164 445.48 -163.57 439.61 -155 439.1
Age of individuals -342.71*** 124.83 -342.71*** 126.43 -345.779*** 123.026 -343.272*** 121.85
(entrepreneur) (years)
Number of months -9.44** 4.09 -9.44** 4.14 -9.41** 4.008 -9.364** 3.985
doing business
Number of 8,346*** 2,666 8,346*** 2,700.43 8,417.66*** 2,626.15 8,413.08*** 2,616.92
Generations of family
in village
Number of relatives -325** 134 -325** 135.42 -335.64*** 131.47 -333.027*** 130.446
in village
106
Appendix A
Table 8: Impact of savings group on household monthly rental expenditure – GLS (continued)
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Error Coefficient Std. Coefficient Std. Error Coefficient Std.
Error Error
Are you member or -2,927** 1,212 -2,927** 1,228.03 -2,959.98** 1,217.54 -2,912.395** 1,204
head of the group
committee? (0/1)
Number of civil -1,736** 891 -1,736** 902.81 -1,734.42** 837.19 -1,684.74** 824.22
servant in household
Value of household 0.0000027 0.0000035 0.0000027 0.0000036 0.0000027 0.0000035
owned land 5 years
ago
Village has either pig -46,764.79 83,436.6 -46,847.70 84,100.69 -46,844.96 83,916.4
pond which has water
throughout the year
or be near river (0/1)
Does village have -30,659.31 55,918.17 -30,707.13 56,154.46 -30,713.54 56,031.4
paved road or near
main road (Km 13
road)? (0/1)
Does village have 78,514.40 137,373.4 78,573.59 137,835.7 78,567.17 137,533.2
primary school up to
grade5? (0/1)
Distance from village -898.635 942.369 -897.67 932.11 -898.15 930.08
to main markets
Price of traditional -9.975 16.173 -9.984 16.258 -9.98 16.22
chicken (Gailard) per
Kg
107
Appendix A
Table 8: Impact of savings group on household monthly rental expenditure – GLS (continued)
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Error Coefficient Std. Coefficient Std. Error Coefficient Std.
Error Error
Daily wage for 8.714 12.837 8.730 12.911 8.72 12.88
construction
F-statistic= 2.851135 F-statistic=2.851135 F-statistic=3.099860 F-statistic=3.309186
Prob(F-statistic)= 0.000155 Prob(F-statistic)= Prob(F-statistic)= Prob(F-statistic)=
0.000155 0.000060 0.000032
R-squared=0.181139 R-squared=0.181139 R-squared=0.184452 R-squared=0.184518
Note: the superscripts ***, ** and * denote rejection at 1 per cent, 5 per cent and 10 per cent critical values.
108
Appendix A
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Error Coefficient Std. Coefficient Std. Error Coefficient Std.
Error Error
Months as VSG 5,670.26** 2,768.37 5,670.26** 2,803.94 5,961.41** 2,328.64 5,975.62** 2,323.98
member
Does household has a 7,079.72 29,520.13 7,079.72 29,899.42
VSG member?(0/1)
Sex of household -73,346.61 49,733.75 -73,346.61 50,372.75 -71,354.07 49,884.70 -71,423.84 49,472.92
head (female=1)
Gender of individuals -21,040.16 29,964.27 -21,040.16 30,349.26 -20,434.61 28,795.59 -16,808.54 28,283.16
(entrepreneur)
(female=1)
Maximum education 6,287.33 3,930.84 6,287.33 3,981.35 6,318.587 3,875.395 6,305.82 3,879.46
of individuals
(entrepreneur) (years)
Household size 20,529.96*** 5,012.84 20,529.96*** 5,077.25 20,845.82*** 4,978.39 20,763.81*** 4,937.83
Age of individuals 1,592.31 1,142.47 1,592.31 1,157.15 1,550.24 1,129.29 1,464.46 1,108.08
(entrepreneur) (years)
Number of months -210.32** 97.97 -210.32** 99.23 -201.72** 100.08 -207.34** 97.26
doing business
Number of -19,403.54** 8,778.61 -19,403.54** 8,891.41 -19,900.6** 8,926.37 -19,117.51** 8,493.06
Generations of family
in village
109
Appendix A
Table 9: Impact of savings group on household monthly educational expenditure – GLS (continued)
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Error Coefficient Std. Coefficient Std. Error Coefficient Std.
Error Error
Number of relatives -135.896 1,292.505 -135.897 1,309.112 -186.27 1,232.45 -242.82 1,241.64
in village
Are you member or -19,447.98 76,584.68 -19,447.98 77,568.68 -23,655.88 7,3921.90 -24,936.75 73,712.6
head of the group
committee? (0/1)
Number of civil 11,323.64 21,117.49 11,323.64 21,388.81 12,310.31 19,502.08 11,545.31 19,684.12
servant in household
Value of household -0.0000758 0.0000979 -0.0000758 0.0000992 -0.0000769 0.0000914
owned land 5 years
ago
Village has either pig -321,772.9* 166,552.9 -328,547.7** 155,380.5 -327,368.3** 154,914.8
pond which has water
throughout the year
or be near river (0/1)
Does village have -142,432.3 98,762.85 -144,617.5 93,385.55 -144,249.4 93,205.14
paved road or near
main road (Km 13
road)? (0/1)
Does village have 408,506* 223,862.9 413,289.4* 214,578.9 411,673.4* 214,079.6
primary school up to
grade5? (0/1)
Distance from village 1,380.33 1,975.93 1,476.9 2,101.4 1,454.18 2,092.53
to main markets
110
Appendix A
Table 9: Impact of savings group on household monthly educational expenditure – GLS (continued)
Independent Fixed Effects model Nonfixed effects model “Naïve” model “Super-naive” model
variable
Coefficient Std. Error Coefficient Std. Coefficient Std. Error Coefficient Std.
Error Error
Price of traditional -27.08 26.85 -28.12 25.11 -28.35 25.05
chicken (Gailard) per
Kg
Daily wage for 16.933 21.342 17.75 19.87 17.94 19.82
construction
F-statistic= 1.670459 F-statistic=1.670459 F-statistic= 1.835944 F-statistic=1.952906
Prob(F-statistic)= 0.045622 Prob(F-statistic)= Prob(F-statistic)= Prob(F-statistic)=
0.045622 0.024821 0.017032
R-squared=0.114734 R-squared=0.114734 R-squared=0.118129 R-squared=0.117802
Note: the superscripts ***, ** and * denote rejection at 1 per cent, 5 per cent and 10 per cent critical values.
111
Appendix B
CASE STUDY
This section discusses the savings groups in Naxaithong city as a case study under
the Women and Community’s Empowering Project (WCEP), one of the many programs
which launched microfinance programs in the semi-urban areas of Laos. Before going to
October 2002, is cooperation between the Lao Women’s Union (LWU) – a Lao
Institute: Thailand (CODI). The project was implemented in three districts in Vientiane,
the capital of Laos, namely Pak Ngum, Naxaithong and Sangthong cities which were
selected by LWU because they were the poorest districts (Asian Coalition for Housing
Rights, 2005), for the period from October 2002 to September 2005 with budget of
2,650,000 Baht39, supported by the Asian Coalition for Housing Rights (ACHR).
The goal of the project is to improve quality of life for women and their families,
and to support the activities for savings, credit and community fund to be a method for
112
Appendix B
management system for savings group, branch, district fund and central
fund;
Savings groups are still a new development in Laos. There are various definitions
A group of people who share the same voluntary spirit to help each other in
solving problems on financial liquidity in order to improve solidarity and upgrade
the living standard of people within the village. Basically, the savings group is an
association which accumulates savings of the group’s members40 and loans them
to members who need to borrow them and charging them a loan interest rate
which must be higher than the savings’ rate of return. In addition, some strong
savings groups also provide member support services, such as vocational training
and establishing production group based on the potential of their members
(Chaleunsinh, 2004: 4-5).
40
That must be equal to or higher than the minimum savings the group has established.
113
Appendix B
Community’s Empowering Project (n.d, 3), the savings group has to have its own
savings group consultant, received promotion from government authority in each level and
other related parties including benchmark village. More details on the organizational
structure will be discussed in following sections. In the next three sections, most of the
information is derived from the savings group manual of the Women and Community’s
1.2.2 Objectives
Empowering Project (n.d), the main objectives of the savings group are listed down as the
following:
• To reduce poverty and improve living status of women and their families;
41
Normally, the group committee at village level includes 5 people who are villagers (generally being
membership of Lao women union at village level) in the village. They take caring every thing in the village
savings group such as doing savings account, loan account, cash book, income and expenses account, and
general ledger.
42
This savings group manual which was originally written in Lao language was translated by the author.
114
Appendix B
• To sustain living status of members and villagers and to have good welfare
step by step;
Step 1: The project proponents meet local authorities at village level to discuss the
Step 2: The local authorities at village level submit a list of the names who self
select to be membership of a savings group43; to the promoter (hence may be the Lao
Women Union at district level or the Project). Then, a meeting is held to provide
information about policies of the group and to set up the savings group by:
• Setting the roles for group committee, group consultant, and member;
consultant;
Step 3: Group committee and group consultant accept the first set of savings
group members. The members have to pay their membership fee and deposit money with
43
The members included in the list should not be less than 20 people (Lao Women Union: Lao PDR and
Community Organizations Development Institute: Thailand, n.d: 17).
115
Appendix B
the savings group at the deposit day which has been set out. The group committee
Step 4: Operations of the savings group’s activities, such as savings and credit
activities, have to follow the rules. The group committee can receive a technical assistant
from the promoter (the project) if the committee do not understand how to operate the
Step 5: Instead of savings activities, members can think about how to create
activities, for example activities for earning extra income, welfare activity, environment
and others, with respect to suitability and capacity of that local area.
Step 6: The promoter of the project, the government authority at each level and
other related organization have to follow up and promote and support a savings group to
savings group members, group consultant, the promoter of the project, the government
116
Appendix B
B. Group committee: A person who received high scores from the members
committee;
• Healthy
• Good attitude;
at the village level or a high respected person in the village or a teacher, is self selected
village or local. Therefore, there are some different and similar articles in regulations
among different savings groups. However, the summary of savings group regulation
• Membership criteria;
117
Appendix B
• Setting loan interest rate for members such as loan for emergency sick;
and normal loans (for doing rice field, crop plant, livestock, education
and other);
• Allocating benefit from total revenue at the year ended such as:
group reserve;
o Welfare fund;
group committee;
44
Normally, dividend paid to the member is come from 70% of savings group profit and the rest of the
profit (30%) is allocated to different categories of fund and reserve (for particular rate is depended on
practice of each savings group), according to author’s survey data (September, 2005).
118
Appendix B
During the period of the project, savings groups have been established in number
of villages in three target districts. It can be seen from table 1 that there were many
there were 24 more savings groups than the number planned. Table 2 shows that about
84% of the villages in the three pilot districts have their own savings groups. It means
that savings groups have good outreach to provide financial services for villagers.
45
The number in this column is higher than the figures in third column of table 1 because it included the
number of savings groups implemented before October 2002 as Pak Ngum district with 30 savings groups,
Naxaythong district with one savings group, and Saengthong district with three savings groups (Women
and Community’s Empowering Project, 2005).
119
Appendix B
Savings groups in the three districts provide different kinds of loans to their
members. The largest loan balance is loans for planting rice field in all three districts,
Table 3: Loan balance for the savings groups in each district as April 2005
However, this paper will focus only on savings groups in Naxaithong district as
the case study due to limitation of time and budget. The following section will discuss
2.1 Background
Naxaithong city, located in the area of Vientiane, the capital of Laos, is about 16
Km from the capital. A total of 56 villages in Naxaithong district are divided to six zones.
46
In Naxaythong district, this type of loan is provided borrowers, who do textile of Lao skirt, called Tam
Hook.
120
Appendix B
Its population is 57,129 people consisting of 28,761 females and there are 10,378 families
The main economic activities in this district are planting rice fields, crop plants,
livestock, textile and trade. According to the Women and Community’s Empowering
Project (2005: 41), the living status of population in this district was poor before the
establishment of the savings group. This could be seen from low income levels, lack of
capital for production, and lack of finance for smoothing consumption and other activities.
This led to the selling of Green Rice47 and borrowing money from the informal sector
such as money lenders at high monthly interest rates of 10 percent to 30 percent. For
example, in the 38 villages which have savings groups, 423 families sell green rice; 1,202
families obtained a loan from money lender; and 57 families were classified as being of a
poor status before the establishment of the savings groups. In addition, in the absence of
the savings group, the education level of the people was limited due to a lack of learning
opportunities, especially for women and lack of knowledge and ability for management
of different activities.
there are 38 village savings groups available in four zones of this district as shown in the
table 2.
Savings groups provided some basic financial services such as credit and savings
to their members. The following section discusses the findings of the survey conducted in
47
As Chanleunsinh (2004:8) defined as, “Green rice selling or Khai Khao Khiew means farmers sell rice at
a discounted price, which is evaluated by the middleman or the traders, before it is harvested. The
traders/middle men then come to take the rice after it is harvested”.
121
Appendix B
six of these villages. Six villages which the author did field survey in September 2005
The two main sources of funds for running savings group are internal funds and
external funds48 . Internal funds come from deposit amounts from member of savings
group (see table 4). At beginning of each month, normally at the first day of the month,
the members have to deposit money to savings groups of at least the minimum required
amount49 which is one of the membership rules. There is no interest paid on such deposits
but members receive dividends every twelve months50. 70 per cent of the savings group
profit is paid to each member as a dividend. The dividend payment to each member is
based on share ratio or proportion of deposit of each member to total deposit balance of
whole savings group. This implies that deposit amount per time from members who
External funds are a soft loan from the central funds which are managed by the
management committee of the project. This loan is lent to a savings group the funds of
which are not sufficient fund for borrowers. The process of making a soft loan request
48
Besides the two main sources of fund, interest income from loan to members is one source of fund for
savings group.
49
Minimum deposit amount is normally 5,000 Kip per month or equivalent to 0.46US dollar as exchange
rate of 10,890 Kip per a dollar in September 2005, according to six savings groups of this case study. Until
September 2005, there has been no limitation for maximum deposit amount in those six savings group.
However, there is limitation on maximum deposit, up to one million kip per time, in case of savings group
in Nakountay village at the time of follow up survey on 2nd March 2006.
50
(a)If members withdraw deposit before dividend payment date, they will not receive any dividend from
their deposit accumulation. (b) If they withdraw at dividend payment date, they will still get dividend from
their deposit, but if they need a sequent loan, they cannot withdraw their deposit. (c) They can withdraw
only at the day of withdrawal, not the deposit day, (The deposit day is the day to make a plan to request for
withdrawal).
122
Appendix B
starts with members of savings group making borrowing plans to their savings groups.
The plans are submitted to the committee at zone level, through the fund committee at
district level to the central fund. The central fund committee issues the soft loan to the
fund committee at district level. Then, the committee at district level will lend to the
members of different groups who make borrowing plans with approval of the fund
committee at district level (Women and Community’s Empowering Project, 2005: 63-64).
September 2005
Source of fund as
Date of the Members Loan balance September 2005
savings in as September External
group Population savings 2005 Internal fund fund
No. Villages established in village group Kip Kip Kip
1 Nakountay 01-Oct-02 1,089 300 167,000,000 158,148,500 -
In the survey sample, there were two savings groups which had external funds.
One is a savings group in Dongluang village which received a soft loan from the fund
committee of Naxaithong district amount of six millions Kip with one year term of loan
and 2% interest rate per month, on 5th August 2005. However, the savings group could
123
Appendix B
repay this loan by three months later. A savings group in Phonekeo village was another
one which obtained soft loan from the fund committee of Naxaithong city. On the 1st of
August, 2005, this savings group borrowed from the fund committee of Naxaithong city
the amount of 11 million Kip with a one year term of the loan and 3% interest rate per
month. At the time of follow up survey in this village, 3rd March 2006, this loan was yet
not repaid.
In addition, as table 4 shows four savings groups are dependent on internal funds
(member deposit) in order to lend to their members. This implies that most savings
groups in Laos are much based on savings mobilization for lending to their members
rather than soft loans or external funds for the project. This is in contrast to the village
bank system in Northeast Thailand of the study by Coleman (1999). Even though, this
Thailand (CODI) which follow the “Village Bank” group lending methodology of the
51
Please refer to Ledgerwood (1999: 85) for more explanation of Village Bank.
124
Appendix B
2.2.2 Credit
Savings groups lend money to their members on a monthly basis. Normally, the
borrowing day is the day after deposit day. Members who require the loans fill the loan
request form and submit it at the deposit day. The group committee collects all the
request forms52 and summaries the amount of loan requested. They then check how much
money the group has at that time53. The savings group provides different kinds of loan as
shown in table 3. In the six savings groups of this sample, loan size is range from 100,000
Kip to 5,000,000 Kip with a 5% interest rate per month54 and 3 to 6 months term of loan55.
Limitation of loan size is dependent on the practices of each savings groups. For example,
in the case study of the six savings groups, the groups in Dongluang, Huannamyene and
Phonesavanh villages have a minimum loan size of 100,000 Kip while other three savings
groups have not settled for that. For maximum loan size, savings groups in Nakountay,
Dongluang and Phonesavanh villages have settled at amount of 5 million Kip, one
million Kip and 300,000Kip respectively, whereas the rest three savings groups have not
settled for that but they consider the loan size depending on the borrowing request and
52
Generally, borrowing conditions are settled in different way among savings groups. In case of savings
group in Nakountay village, some conditions for member borrowing are: (1) members have to have deposit
amount with the group for guarantee; (2) If they borrow at 500,000kip, TV or freeze can be collateral; if
they borrow amount more than 3,000,000kip, a land certificate can be collateral but it is also depended on
how much volume of their deposit with the group; (3) if member has no any things to be guarantee, friends
can be guarantor; (4) If a wife borrows, her husband has to be guarantor and vice versa.
53
Normally, savings group does not keep any money balance with the group after receiving deposit from
members, then the day after, all money has to lend out to members depending on their request and
borrowing conditions. In case of deposit balance of the group remaining at 1 million Kip, the group
committee will deposit that balance to bank such as Agricultural Promotion Bank, an example of savings
group in Nakountay village.
54
Sometimes, interest rate per month is 3%, an example of savings group at Nakountay village, it is
depended on what kinds of loan.
55
Three new village savings groups have 3 months term of loan while three old village savings group
practice on 6 months term of loan during the survey time. For example, savings group in Nakountay village,
term of loan was 3 months for the period from year 2002 to 2004, but since 2 March 2005, term of loan has
been 6 months.
125
Appendix B
providers, apart from the savings group, provide basic financial services, mainly credit
and deposits in the survey area. For credit access, 12% of sample survey could obtain a
loan from financial providers. The Agricultural Promotion Bank (APB) was the first
financial provider at 6%, followed by money lender at 4%, while other microfinance
providers covered only by 1% of sample survey (see table 5). It is interesting that 17% of
the control group had access to credit from other financial providers. Of that, APB was
with other financial providers. APB and other microfinance providers covered by 4% per
each while the 2% was covered by money rotating (see table 6). For control group sample,
8% of its sample could access to financial providers which APB and other microfinance
126
Appendix B
Table 5: Loan balance at different sources of finance for sample survey in six
Note: a) One person could access to credit in both APB and relative &friends.
b) This consists of savings group of Lao Women Union at Naxaithong city, Rural
Development Cooperative Naxaithong and others.
127
Appendix B
Note: a) One person deposited with both APB and Money rotating
128