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Microfinance service
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Growing demand for microfinance services

A microfinance institute in Vientiane has opened a new office so it can better meet rising demand for its services.

Ekaphattana Microfinance Institute (EMI) Director, Mr Somphone Sisenglath, said the private company had grown significantly since it was created in 2006 with start-up capital of US$100,000 from 10 shareholders.

M icrofinancing is a method of poverty alleviation which provides financial services to poor people. The principle is to collect savings from clients and use this money as capital to provide loans. It aims to empower people to improve their own circumstances.

Mr Somphone said EMI focused on borrowers who conducted activities that generated quick returns of income, such as trading activities (small shops in people's homes), market vendors, service providers (restaurants, beauty shops, barbers) and production activities (food processing).

Mr Somphone said most EMI clients lacked the required capital to obtain loans from commercial banks.

“The banks like to allocate big loans and this makes it difficult for people who operate small businesses to access bank loans,” he said.

“The micro finance institute can provide people with small loans, whether they are loans for groups, individuals or businesses.”

Mr Somphone said it was hard for poor people to access commercial banking services because they were not considered financially viable, they worked long hours and could not physically go to the bank, and there were no banks in most provincial areas.

EMI places a strong emphasis on voluntary savings and client financial education. The majority of its clients need small-scale loans ranging from 500,000 kip to 20 million kip.

Banks often require people to own land which can be used as a guarantee for a loan, but EMI allows borrowers to use property such as motorbikes or cars to guarantee their loans.

EMI charges 4 percent interest per month on loans, which is higher than bank rates. Mr Somphone said this was because EMI provided small loans and needed to employ more staff to provide the service.

“A bank may lend 1 billion kip to a few business people, but EMI lends the same amount of money, but to hundreds of people,” he said.

At the end of May 2008, EMI had over 620 active borrowers and an accumulated loan disbursement of almost 3 billion kip (approximately US$620,000).

It employs 23 people, including credit officers who spend their days out in the markets collecting loan repayments and sourcing new clients.

EMI is the first licensed microfinance institution to operate in the Lao PDR under the government's microfinance regulations which were issued in 2005.

Its new office is located in Hai Sok village, Chanthabuly district, Vientiane . There is also a branch office located in Sikhottabong district.

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