A research study submitted in partial fulfillment of the requirements for the degree of Master of Science in Regional and Rural Development Planning

Research Studies Project Report (M.Sc.) - Asian Institute of Technology, 2007

This research deals with the assessing credit needs of the rural poor in Thakhek district, Khammouane Province in the Central of Lao PDR. The main objectives of the research are to study the credit needs of the poor for different purposes; to study capacity of the credit institutions, their delivery mechanism and performance; to identify the problems of the borrower and credit institutions, and to provide recommendations in order to meet the credit needs of the poor. The scope of this study is focused on the formal institutions such as VIP Project under ADP Program delivering microcredits over last 5 years. The research has been conducted with 50 sampled credit member households, who are involved in agriculture activities. Two villages are selected in order to have adequate number of samples or households who have availed credit. The purpose is not to make a comparative study. To measure this, the analysis has been done based on data collected through households' surveys, interviews, observations, and discussions with credit member households and key informants involved in the projects. The research focused both on qualitative and quantitative analysis. Main finding of this research is that rural households require more credit for investment in agriculture production due to limited credit for each of activities from the credit institutions or microcredit projects. However, most of the rural people are satisfied (100%) with credit delivery mechanism and performance of the project through increased opportunities for employment, incomes, agriculture output, and health care. In addition, rural poor need credit not only for agriculture and non-agriculture purposes but also for consumption, for daily needs, to compensate for lack of knowledge and skills that affect productivity, and for solving problems due to natural disasters. It is finding also found that, the credit was provided initially without interest rate. To meet the emergencies and sustainable, the interest rate was fixed by the village committee from 3-7% per year depending on the nature of the activity related to farm production, as agreed by the credit members. The research concludes that, limited credits are the major problems faced by the credit sources (VIP under ADP programs) as evidenced from the credit members. Most rural households also have faced the problems in terms of lack of knowledge and skills for improving the productivity in agriculture production and due to inadequate activities related to non-agriculture production. Few recommendations are given in order to strengthen the rural credit delivery mechanism and performance of the microcredit project and credit institutions in the rural and remote areas of the Lao PDR.