The Bank of Lao PDR (“Bank”) reported that the value of deposits at microfinance institutions has increased exponentially; the figure, which was just LAK133.89 billion in Q2 2014, grew to LAK263.69 billion in Q4 2015. By December 2016, it was LAK467.18 billion.
Experts credit this significant growth to commercial banks’ lowering of interest rates in 2015, in accordance with the Bank’s decision to drive domestic productivity through lower interest loans. This drove depositors to place their money with microfinance institutions, which offered higher rates than commercial banks. If this trend continues, this may result in funding difficulties for smaller banks, or those with weaker financial capacity, which will affect their long term viability.
There are 2 types of microfinance institutions namely, Deposit-taking microfinance institutions and Non-deposit-taking microfinance institutions.
This alert is for general information only and is not a substitute for legal advice.