"Really poor people in Laos are not looking for microcredit from Western countries" says Timo Hogenhout, a Dutchman who for the past few years has been working as an advisor to international organisations in Laos.

Nearly half the population of Laos lives below the poverty line of 1.25 dollars a day. "People in Laos are too poor to take out a loan. What they need is a financial buffer to help them overcome setbacks like poor harvests, the death of a cow or a sick family member" says Hogenhout.

Adversity
People try to build up a buffer by saving. "Because the banks are too far away, they don't save money; they save animals and goods. But if your wife gets sick you can't always sell your cow quickly. That suggests there is a need for money: a microcredit to finance setbacks."

Apart from saving, insurance is another way to cope with adversity. "There is a real need for that kind of financial service in Laos" Hogenhout believes. He argues for the creation of a system of savings accounts and insurance policies through local banks. "They should be institutions which offer security, preferably run by local people. It's important that these people are properly trained first."

Solidarity
Laos is a country where corruption is rife. Citizens and government both celebrate the principle: one good turn deserves another. There is a chance that involving local people will introduce corruption into microfinance. Hogenhout regards this as a cultural difference. "What we call corruption they see as solidarity: you scratch my back and I'll scratch yours. If you lend someone money, you get a bit of money back. Refusing to pay is regarded as an insult."

Hogenhout thinks the money transfer system in Laos needs further development. "If you live in the countryside and you have a child studying in the city, it is difficult to send money. Bank transfers don't exist and you can't use a mobile phone for that in Laos."

Western standards
Developing a Western-style money transfer system in a country like Laos means imposing Western standards. Timo Hogenhout does not think that's necessarily a bad thing: "The upside is that people may increase their production and thereby their living standard. Instead of rice and vegetables they may see a piece of meat appear on the table occasionally." But there are also drawbacks. "Sometimes you have to be tough and in a tight-knit society like Laos it will make it a little less relaxed."

The Dutchman believes there is plenty of room for new microfinance institutions in Laos. However, only on condition that the Laotians are properly trained first.

"It's not a good idea to flood a country with donor money without a good system of supervision. If you just give money without people having to repay it, you're sending the wrong signal. You're discouraging them from taking action themselves and training themselves. If they are investing their own savings, they will deal more carefully with the project."