Laos' "Different Face" of Poverty  (Page 2 of 2)

“I would like to open a small shop to earn more money” says Kaum, “but nobody wants to give me a loan.” She informs me that her home does not qualify as collateral, which prevents her from securing loans to improve productivity or expand her farm.

Government programs for skills training or small business development do not exist, and the few non-governmental organizations (NGOs) operating in Vientiane only have enough resources to reach a small proportion of the people who would benefit from their work. As Oxfam country director Dominique van der Borght points out, the country’s education system falls well short of delivering the services needed in a country that has a rapidly growing economy. Consequently, foreign firms operating in Laos often bring their own staff and laborers because local workers lack the necessary skills and linguistic training. Only the lowest level jobs are given to local residents.


The Asian Trends Monitoring survey on urban poverty and service provision, conducted in September 2012, showed that among ten categories of basic needs “finding work opportunities” and “saving money” were rated as the most difficult to fulfill for Laos’ poor.

Micro-entrepreneurs who want to take advantage of new opportunities in the emerging non-agricultural economy face a different kind of obstacle. Up until 2004, Laos had no laws governing microfinance institutions (MFI) and formal financial services were inaccessible to the poor. Eight years later a number of MFIs are offering savings and loan products, but they largely deal exclusively with clients who have collateral. Moreover, their branch network is focused on Vientiane where they a serve small, but established entrepreneurial class in the city.

In a way, the risk-averse business model of any financial organization favors individuals and companies who already have established their business model. For those without collateral, the MFIs are starting to offer group loans, but the reach of these initiatives is still limited. The MFI capacity to provide free business training and actively support aspiring entrepreneurs is even more limited. The MFIs themselves are still struggling to build reliable client bases to secure their long-term survival in an increasingly competitive market.

Founder and executive director of Laos’ first MFI, Ekphattana Microfinance Institution (EMI), Somphone Sisenglath, states that MFIs also try to emphasize to clients the importance of saving part of their incomes. “Savings are part of our mission,” Sisenglath tells me. “Access to credit is one thing, but if there is nothing left [at the end of repayment], they are still poor.” Accordingly, EMI requires that all its clients save 10% of their initial loan in order to instill in them the importance of building wealth.

Access to microloans coupled with educational opportunities to learn about small business management would go a long way towards building an additional stream of income for families like Kaum’s. Unfortunately, as members of the bottom echelon of society, Kaum’s family and countless others like them do not have access to these kinds of services.

Mr. van der Borght describes the situation in Laos as having a “different face of poverty.” He explains that importing solutions from places of scarcity may not work in a country like Laos, which has an abundance of natural resources but suffers from a chronic lack of infrastructure and a grossly underfunded social service system. Expanding access to education and financial services to families like Kaum’s, as well as integrating them more fully into supply chains, are crucial if Laos is to boost household income for the vast majority of its citizens working in agriculture and non-agriculture industries.

Johannes Loh is a research associate at the Asian Trends Monitoring Bulletin at the Lee Kuan Yew School of Public Policy, University of Singapore.

Tristan Knowles
November 29, 2012 at 08:35

As another person has pointed out in the comments, Rome wasn't built in a day. And neither will a modern Lao economy be built in just 20 years. Lao only began economic reforms in the very late 80's and more seriously in the 90's and 00's.
Nonetheless, their economy has done well and levels of poverty have decreased over this time as the economy has grown. The problem as I see it is that they now need to shift up the supply chain and do more manufacturing and value adding, rather than just relying on selling their natural resources cheaply. By doing more manufacturing more jobs would be available for rural people or their children.
Yes Lao still has high dependence on agriculture for livelihoods, but it's not a bad thing. It's just that the country is in the early stages of transforming from an agrarian to an industrialised economy. Their challenge is to ensure that the coming decade gains them quality economic development and not just quantity of economic growth.

November 29, 2012 at 08:27

I have  visited Laos many times in the past and even people I know who run businesses have a very precarious life; The tourist season is about 6 months after which many of the guesthouses and restaurants are virtually empty with little or no income.
People in the outlying villages have seen there lives unchanged over the past decades apart from having mobile phones and maybe a satellite dish; the children still suffer from high mortality rates due to cholera, malaria and other diseases which go untreated. Poverty is rife especially in the minority tribal villages.
As with western society, the rich are getting richer while the poor get nothing!
The future for many Lao people does not look good unless they leave which many want to;
I hope they can continue to smile and be hospitable despite this.

November 18, 2012 at 23:22

If Laos can find a way to reduce corruption, it would set a path out of poverty. Also, Laos needs to learn to produce their own products, instead of relying on Thailand, Vietnam, etc… imports.

November 18, 2012 at 22:46

Eradication of poverty cannot be done overnight! There are billionaires and the homeless in the United States the richest capitalist country!

Sang Le
November 18, 2012 at 21:47

Lao is still a communist country?. Although, over the past few years, Lao has reached significant achivements in economic development, especially high economic growth rate, this country still a backward country with low educational level. Lao is different from its neighbors Vietnam and Cambodia because this country has no coastal areas and sea, it is an disavantage of Laos . There is the only way for this country to develop sustainably is focus on education to generate skilled laborers. To do so, Laos government need to open their mind to get helps from NGOs and other countries.

Wasted Dollars
November 18, 2012 at 14:31

What happened to all the money selling China the city land>?
Where was the promise of better education?
When I see the World Bank and the UN in any story on a third world country
I shutter to think the end of the story

November 18, 2012 at 12:34

one key factor that the author misses on the poverty in this country of Laos is the ramnants of Indochina War– the unexploded ordinance or UXO. These bomblets were dropped on this country more than those combined during WW2. after almost 4 decades, they are still deadly and keep the Lao poor because they prevent the people to work on their farm lands.

November 17, 2012 at 22:53

Laos needs a strong education system that every Laos people can benefits and less corruption so the whole country can be out of poverty.

November 17, 2012 at 17:25

I happened to Laos in 2011, in my summer vacations, the facts in the article may be correct, but the writer has failed by bringing the views of single lady, I’ve met hundred of people of different classes, they’re happy, they are busy and lively!

Share your thoughts

Your Name
Your Email
required, but not published
Your Comment

Sign up for our weekly newsletter
The Diplomat Brief