Network Snapshot: Microfinance Working Group for the Lao PDR ...

Network Snapshot:Microfinance Working Group for the Lao PDRCONTACT INFORMATIONMicrofinance Working Group for the Lao PDR (MFWG) Email: mfwglaopdr@gmail.com113/01 Setthathirath Road, Chanthabouly District, Web: www.mfwglaopdr.orgPO Box 4030Bandith Sisoukda, ChairVientiane Capital (Lao PDR)Tel/Fax: +856 21 262 979GEOGRAPHIC COVERAGE: Lao PDR (South East Asia)MEMBERSHIP (December 2011):Total number of members: 36MFIs: 21 (= 62% of formal MFIs in Lao PDR)Donors/bi- & multilateral organizations/(I)NGOs: 9Business service providers: 6STAGE OF DEVELOPMENT: EmergingESTABLISHMENT: Informally established in May 2007, legal registration as an associationplanned for 2012MISSION: To enable the microfinance sector in Lao PDR to provide sustainable, demand-drivenand efficient services to poor and low-income populationsSTRATEGIC OBJECTIVES:Knowledge Management/Research & Representation: MFWG is the coordination andinformation platform for the industry1. Strengthen coordination, collaboration and information flow among microfinancestakeholders2. Support ongoing learning and research in the microfinance sectorAnnual Report 2011 Page 1

3. Improve sector transparencyAdvocacy: The market environment in Laos is conducive to sector development4. Engage in policy dialogue that encourages an enabling market environment forsustainable microfinance that meets international good practice principles; provideinput and feedback to policy makers and/or regulator with regards existing or desiredpolicies that have the potential to affect the sectorCapacity Building: MFWG members have access to quality microfinance services5. Identify and address common needs in training and technical resource development6. Pool capacity development resources to maximize impact and outreach in movingtowards international good practice principlesMFWG Organizational Development: MFWG is the professional microfinance industrynetwork in Laos7. Be a formal network (legally registered entity) with sufficient funding in place to run thenetwork sustainably8. Be sufficiently staffed with a professional staff and Board of DirectorsSERVICES: Policy advocacy Capacity Building Knowledge Management/Research & Representation (including PerformanceMonitoring)STAFF: 1.5 (Office manager/full time, technical advisor/part time)AFFILIATION WITH INTERNATIONAL NETWORKS: Small Enterprise and Education Promotion (SEEP) Banking with the Poor Network (BWTP) Social Performance Task Force (SPTF)FINANCIAL INFORMATION 2010 2011Total Funding US$ 71,995.63 US$ 69,445.95Donor Funding US$ 67,695.63 US$ 64,228.95Main Donors SBFIC, GIZ, ADA, SEEP, BWTP SBFIC, GIZ, ADA, UNCDF, SEEP,BWTPSelf-Generated Income 6% 8%Sources of Self-Generated IncomeMember MFIs and service providercontributionsTraining & administration fees,member MFI contributionsAnnual Report 2011 Page 2

Table of Contents:I. ACRONYMS & ABBREVIATIONS .......................................................................................... 4II. MFWG Board of Directors & Office Manager ...................................................................... 5III. International Donors and Support Agencies ....................................................................... 7IV. Foreword by the MFWG Chair ........................................................................................... 8V. MFWG Background .......................................................................................................... 10VI. MFWG Vision, Mission and Core Values .......................................................................... 11VII. Strategic Objectives ....................................................................................................... 12VIII. Governance Structure and Management....................................................................... 14IX. MFWG Activities and Achievements 2011 ........................................................................ 16X. Financial Report ............................................................................................................... 40XI. Conclusions & Outlook for 2012 ...................................................................................... 47XII. Annexes......................................................................................................................... 48Annual Report 2011 Page 3

I. ACRONYMS & ABBREVIATIONSAFPANSBOLBWTPDGRVDTMFIFISDKfWIFCILOINGOGIZGOLHRDMAFIPPMCPIMFCMFIMFWGMIXNDTMFINERINGONGPESNSOSCUSEEPSBFICSPTFTOTPACSAPATPPIPWRUNDP/UNCDFAccess to Finance for the Poor ProjectAsia Network SummitBank of Lao PDRBanking with the Poor NetworkGerman Cooperative and Raiffeisen ConfederationDeposit Taking Microfinance InstitutionFinancial Institution Supervision DepartmentKreditanstalt fuer WiederaufbauInternational Finance CorporationInternational Labor OrganizationInternational Non Government OrganizationDeutsche Gesellschaft fuer internationale Zusammenarbeit GmbHGovernment of Lao PDRHuman Resource DevelopmentMaking Access to Finance more Inclusive for Poor PeopleMicrofinance Council of the Philippines (National Microfinance Network)Microfinance CenterMicrofinance InstitutionMicrofinance Working Group for the Lao PDRMicrofinance Information ExchangeNon Deposit Taking Microfinance InstitutionNational Economic Research InstituteNon Government OrganizationNational Growth and Poverty Eradiation StrategyNetwork Support OrganizationSavings and Credit UnionSmall Enterprise Education and Promotion NetworkSavings Banks Foundation for International CooperationSocial Performance Task ForceTraining of TrainersPublic Administration & Civil Service AuthorityPoverty Assessment ToolProgress out of Poverty Index (Poverty Assessment Tool)Participatory Wealth Ranking (Poverty Assessment Tool)United Nations Development Fund/United Nations Capital Development FundAnnual Report 2011 Page 4

II.MFWG Board of Directors & Office ManagerBandith SisoukdaChairNational Microfinance Advisor,GIZ-AFPEmail: : bandith.sisoukda@giz.deSaysamone KouanmeunangchanhVice-ChairDirector, Saynhai SamphanhDTMFIEmail:saysamone_ssdtmfi@yahoo.comSomchit BounleumeTreasurerDirector, DMID DTMFIEmail: somchit_dmi@hotmail.comSomchith DuangmexaySecretaryManager, OudomxayDevelopment NDTMFIEmail:microfinance_odx@yahoo.comChantha MingbouphaBoard MemberAnnual Report 2011 Page 5

Deputy Director, EMI DTMFIEmail: chanthabp@yahoo.comViengnakhone LovanxayMFWG Office ManagerEmail:vlovanxay@yahoo.com113/01 Setthathirath RoadVientiane Capital , Lao PDROffice Hours: Mondays-Fridays,8-12am, 1-5pmOffice Telephone & Fax:+856 201 262 979Email: mfwglaopdr@gmail.comWeb: www.mfwglaopdr.orgAnnual Report 2011 Page 6

III.International Donors and Support AgenciesWe would like to thank our donors and support agencies for their technical and financialsupport in 2011.Annual Report 2011 Page 7

IV.Foreword by the MFWG Chair2011 has been a very productive year for the MFWG. We were able to establish ourpermanent office, employed a full-time office manager to engage in the day-to-day businessof the network and prepared the ground for establishing the network as a legal entity withthe Ministry of Home Affairs (association registration). Thanks to active marketing effortswe were able to increase our member base to 36 members (which represents 62% of theformal microfinance sector in Laos). A sound governance system for the network wasestablished by creating by-laws, an internal control and reporting system as well asconducting the first financial audit for the year ending 31 December 2011.Regular (bi-monthly) member and Board meetings were held to present sector relevanttopics on a demand basis and discuss MFWG progress and challenges. Moreover, followinga strategic planning workshop in July, the MFWG prepared and finalized its draft strategicand business plan for the period 2012-2014 and thus has outlined a roadmap for thedevelopment of the network and its strategic objectives for the next three years to come.A comprehensive mapping exercise of formal MFIs and microfinance programs wasundertaken and added to the newly established bi-lingual website. The new website wasfinally launched in December and contains a vast amount of data for the sector which aimsat improving sector transparency, cooperation and coordination of sector activities.Moreover, we set up a ‘Human Resource Development Task Committee’ and have offeredmuch needed and high quality training for microfinance practitioners. Simultaneously, wepursued our ongoing advocacy efforts and provided the Bank of Lao PDR (FinancialInstitutions Supervision Department) with valuable feedback regarding the draftMicrofinance Decree and raised awareness about identified issues which are negativelyaffecting sector development.2012 will be an important year for the microfinance sector as we await the promulgation ofthe Microfinance Decree which will for the first time in Lao PDR allow minority foreigninvestment for MFIs. We hope that this will help the sector to grow but we need to ensurethat MFIs are well prepared and equipped for this change to happen and the MFWGcertainly has to play a crucial role in the process. The capacity building and training needs ofMFI staff and Boards continue to be huge which cannot be addressed by MFWG alone.MFWG will increase its capacity building and training activities to help addressing theseneeds but more concerted efforts are needed to support MFIs in gradually increasing theircapacity and expertise to effectively manage microfinance operations.In addition, we hope that in the coming year we can continue our efforts to further increasesector transparency by introducing (social and financial) performance data monitoring andbenchmarks for Lao MFIs and creating a semi-annual newsletter with relevant sectorinformation. MFIs need to focus on improving their social performance to avoid missiondrift and multiple borrowing of clients. Outreach to the poor needs to be further enhancedby creating appropriate products for poor clients living in rural areas. The MFWG willAnnual Report 2011 Page 8

support this by organizing a market research & product development training and also byconducting social audits for MFIs.Also, we will continue our efforts to become a formal entity by the end of this year(temporary association license) which will allow us to further expand our products andservices offered to our members. We will also introduce member fees and charge trainingfees to be able to gradually reduce donor dependency and cover an increasing percentageof our operating expenses by self-generated income.In order to be able to achieve our goals set for 2012 we need to recruit additional staff andwe hope to be able to fill the position of a General Director for the network to enable theMFWG to sustainably run and expand its operations.On behalf of the MFWG Board I would like to thank all our members, donors/internationalagencies, relevant Government of Lao PDR Authorities and staff for their (technical and/orfinancial) support over the year. We hope to be able to further expand our outreach andsupport structure in 2012 to pursue our goal to ‘enable the microfinance sector in Lao PDRto provide sustainable, demand-driven, efficient services to poor and low incomepopulations in Lao PDR’.________________________________________Bandith SisoukdaMFWG ChairAnnual Report 2011 Page 9

VI.MFWG BackgroundThe Microfinance Working Group for the Lao PDR (MFWG) is the national microfinance industrynetwork and was established in May 2007. It aims at bringing together microfinancepractitioners and other relevant stakeholders to share experience and information about thesector with the goal to improve sector coordination, transparency, sustainability and quality ofmicrofinance services. Its services focus on three core areas: knowledge management/research& representation, capacity building and advocacy.The MFWG’s mandate is embedded in and supports the poverty alleviation efforts of theGovernment of the Lao PDR, in particular those outlined in the National Growth and PovertyEradication Strategy (NGPES) 1 which include movement towards a market oriented economy,financial sector reform specifically of microfinance providers, client-driven microfinance servicedevelopment, MFI autonomy including that of interest rate setting, legal space for sustainablemicrofinance institutions and last but not least ‘the creation of a microfinance forum’.MFWG members presently comprise regulated microfinance institutions (DTMFIs, NDTMFIs,SCUs and Network Support Organizations) as well as donors, bi/multi-lateral agencies, INGOs,service providers and resource persons working in microfinance. The network is a member ofreputed regional and global networks (such as SEEP, BWTP and SPTF) to ensure exposure toglobal microfinance trends & developments and international sector representation.Since January 2011 the MFWG has a secretariat and full-time staff. As a young, emergingnational microfinance network it now strives to become a formalized, professional andsustainable organization capable to permanently represent the industry interests andresponding to its needs.1 Government of Lao PDR, ‘National Growth and Poverty Eradication Strategy (NGPES)’, 2003. The NGPES providesa long-term strategy for poverty reduction in Lao PDR until 2020.Annual Report 2011 Page 10

VII.MFWG Vision, Mission and Core ValuesVISION: ’To be the representativebody for the microfinance industry inLao PDR’MISSION: ’To enable the microfinancesector to provide sustainable, demanddriven,efficient services to poor andlow income populations’Core Values of MFWG:InclusionMFWG respects & engages allmicrofinance stakeholders inLaos & places high value on thediversity of experiencerepresented in the sectorCommitmentMembers assign & devotethemselves to actively engage inachieving the vision & mission ofthe MFWGAccountabilityThe MFWG takesresponsibility for itsdecisions and activitiesTransparencyThe MFWG strives for fulltransparency in its operationsand services. It is open andhonest about its experiences anddiscloses and shares informationwith its members & stakeholdersSocial OrientationThe MFWG places highvalue on the interests, wellbeingand needs of poor andlow-income populations inLao PDRAnnual Report 2011 Page 11

VIII. STRATEGIC OBJECTIVES:a) Knowledge Management/Research & Representation:‘MFWG is the coordination and information platform for the industry’1. Strengthen coordination,collaboration and information flowamong microfinance stakeholders2. Support ongoing learning andresearch in the microfinance sector3. Improve sector transparencyb) Advocacy: ‘The market environment in Laos s conducive to sector development’1. Engage in policy dialogue thatencourages an enabling marketenvironment for sustainablemicrofinance that meetsinternational good practiceprinciples; provide input andfeedback to policy makers and/orregulators with regards the existingor desired policies that have thepotential to affect the sectorAnnual Report 2011 Page 12

c) Capacity Building: ‘MFWG members have access to quality microfinance services’1. Identify and address common needsin training and technical resourcedevelopment2. Pool capacity developmentresources to maximize impact andoutreach in moving towardsinternational good practiceprinciplesd) MFWG Organizational Development: ‘MFWG is the professional microfinance industrynetwork in Laos’1. Be a formal network (legallyregistered entity) with sufficientfunding in place to run the networksustainably2. Be sufficiently staffed withprofessional staff and Board ofDirectorsAnnual Report 2011 Page 13

IX. Governance Structure and ManagementThe General Assembly is the supreme authority and decision making body of the network.The assembly is held annually and comprises all members. It reviews and approves theannual report established by the Executive Office on the affairs and activities of thenetwork, the previous year’s accounts and the business and operational plan for the year,and elects the Board of Directors in accordance with its by-laws.The Board consists of minimum five members who have to be members of the MFWG. TheChairperson of the Board is the legal representative of the network and represents thenetwork internally and externally. He chairs the General Assembly, member meetings andthe Board meetings and ensures that the operations stay on track. The Board Directors areresponsible for the overall direction, strategy and control of the management of thenetwork and the formulation of policies to be applied in the conduct of the business.The Board of Directors may appoint specific Task Committees as may be deemed necessaryin the implementation of the purposes, programs and activities of the network. In 2011, thenetwork established its first task committee, the Human Resource Development TaskCommittee which is in charge of strengthening human resource capacity of the sector.It is planned to create two more task committees in 2012: An advisory committeecomprising representatives of main donors and international agencies working inmicrofinance in Lao PDR and a policy committee to follow up on progress related to sectorpolicies and regulations.The Executive Office is a permanent support organ of the network providing support to theBoard in the management and administration of network’s activities.Staff performance is assessed against their terms of reference on an annual basis. Presently,the MFWG has one full-time staff (office manager) to handle all administrative and financialtasks of the network in close cooperation with the Board of MFWG.Please also refer to the diagram on the next page for the organizational structure of thenetwork:Annual Report 2011 Page 14

Organizational ChartMicrofinance Working Group for the Lao PDRGeneral Assembly(All Members)Board of Directors(minimum 5 Members)Task Committee(e.g. Human Resource Dvpt)Task Committee(e.g. Advisory)Executive OfficeTask Committee(e.g. Policy)(Permanent Secretariat – General Director, Office Manager, other Staff)Office Operations:• Membership• Public Relations• Accounting• Administration• Donor LiaisonMember Services:• Capacity Building/Training• Advocacy• Knowledge Management &Research/Surveys• RepresentationMembersAnnual Report 2011 Page 15

X. MFWG Activities and Achievements 2011IX.1. Knowledge Management/Research & Representation MFWG in partnership with GIZ-AFP conducted an audit survey with Lao MFIs(January)GIZ-AFP has, with the support of MFWG, researched the state of practice with regards toexternal audits for MFIs and SCUs in Lao PDR as audits form a key component for sectordevelopment.A total of 28 organizations (which comprised 32% DTMFIs, 40% SCUs and 28% NDTMFIs)were interviewed of which 54% had been audited. Of the audited organizations, 87% saidthat they observed an improvement following the audit (i.e. with regards their accountingsystems & operations, security, credit systems, cash & depreciation control, management,better expenditure control).From the total MFIs/SCUs questioned, 46 % had not been audited because they were eithernewly established, and hence not developed enough for an audit, or they would like toconduct an internal audit first. Other reasons were that they lack funds to pay for an audit,they understood that the MFIs only need to be audited after 3 years of operations and/orbecause the MFI was not aware of the audit requirement. Others understood that BoLwould conduct the external audit for them which indicates that MFIs think that the BoLsupervisory examination which is conducted once a year is the same as an external audit.The auditing services to MFIs/SCUs were provided by eight Vientiane based auditing firms: AP – Amphone Accounting Service, Vientiane ASC – Accounting Service Company, Vientiane Auditing Service Expanya, Vientiane Chanthavong & ROCS Company Ltd., Vientiane LanXang Accounting Service, Vientiane Triple A Company Limited, Vientiane KPMG, Vientiane Price Waterhouse Cooper, VientianeThe cost for an audit ranged between US$125 – US$6,000 per MFI/SCU. Two Co-Chairs attend 1 st Social Performance Asia Working Group meeting inBangkok (February/March)The two Co-Chairs of the MFWG participated in the 1 st Social Performance Asia WorkingGroup Meeting which took place in Bangkok from 28 February – 2 March with support fromSEEP and PLAN Asia. It brought together ten networks from Asia and other interestedstakeholders like Planet Finance, MicroFinanza Rating and Microsave. The first day wasorganized as an orientation of social performance whereas the next two days werededicated to discussing the role of the group going forward and developing a strategy forthe next three years. The MFWG joined the Social Performance Task Force (SPTF) as amember in October 2010. The SPTF Asia Working Group was formed in 2009 during a SPTFannual meeting in Madrid as one of the sub-groups of the SEEP associations working group.Annual Report 2011 Page 16

The objective is to catalyze work on social performance and improve coordination amongstnetworks at the regional level.MFWG Co-Chairs Bandith Sisoukda and Ursula Hammerich attend the‘1 st Social Performance Asia Working Group Meeting’ in Bangkok from 28 February – 2 March 2011 Social Performance Management Survey conducted & Thesis on ‘Role of MFWG inSocial Performance’ finalized (June-September)Julien Jacquet, who worked as a MFWG intern in Vientiane from mid-June – August 2011,wrote a Master Thesis on ‘The Role of Microfinance Networks in Social Performance – TheCase of the Microfinance Working Group for the Lao PDR’ (September 2011) under thesupervision of Professor Cecile Lapenu (European Microfinance Program 2010-2011) and theMFWG advisor. The thesis investigates the role of an emerging microfinance network likeMFWG in establishing a strategy to improve social performance of MFIs. Networksrepresent ‘an excellent entry for social performance, thanks to their ability to raiseawareness among members and key stakeholders. Networks are also well-positioned toadvance the implementation of social performance in a way that reflects local context andmembers’ needs, through training, capacity building, pilot-testing and peer learning.’ 2 Thethesis used an adapted version of the CERISE SPI questionnaire for MFI data collection and16 MFIs participated in the survey and submitted their data. The data was subsequentlyconsolidated, analyzed and used as basis for the development of a social performancestrategy. The decision tree developed by Imp-Act Consortium and the CERISE Network wasused as a tool to establish this strategy.The intern also prepared a presentation of main findings which were shared with MFWGmembers during its members’ meeting on 3 October 2011. Key results and challenges toaddress in the future include a lack of focus of MFIs on poor and rural clients and a lack ofproducts and services well adapted to the needs of these clients. Very few MFIs trackpoverty levels over time (poverty assessments) and the majority of participating MFIs (62%)identify multiple-borrowings and over-indebtedness of clients to be an issue. Key findingsand recommendations from the study were also used as a basis for the development of thecontent for the Social Performance Management Training of Trainers which was conductedin August 2011 (see under IX.2.Capacity Building).2 Eva Bankowska et al., ’The Decision Tree for Microfinance Networks. Empowering Networks to Develop aSocial Performance Strategy, CERISE and the Imp-Act Consortium represented by the Microfinance Centre’,2011, p.5Annual Report 2011 Page 17

MFWG participates in the Annual Conference of the Social Performance Task Forcein Den Bosch/Holland (June)The MFWG advisor attended the SPTF Annual Conference in Den Bosch/Holland from 19-23June. The meeting focused on how to move the social performance agenda forward andgiven the key role networks play in doing so, there were two days for the SPTF AssociationsWorking Group to meet (a pre- and post-meeting on 20 th and 23 rd June). The MFWGcollected relevant information on social performance management, such as universalstandards, various campaigns and initiatives, MIX reporting on social reporting, etc. withrelevance to the Lao microfinance sector. In addition, there were side events and meetings(i.e. social investors meeting, IMP-ACT consortium, SMART Campaign and SocialPerformance Management Working Group) to deepen the understanding of various actorsinvolved in social performance and their initiatives. Six Lao MFIs submit their comments and feedback regarding the UniversalStandards of Social Performance to the Social Performance Task Force(October/November)The SPTF Universal Standards for Social Performance Management are a set of standardswhich specify MFI social performance in relation to the following areas: Social goals andtarget clients, governance and employee commitment to social goals, protecting clientrights, products and services that meet clients’ needs, social responsibility to employees,client monitoring, and responsible financial performance. Following the discussion on thedevelopment of Universal Standards of Social Performance during the SPTF Annual Meetingin June (which also highlighted the important role of networks in promoting the use of socialperformance standards among MFIs), the MFWG was requested to administer feedbackfrom Lao MFIs about the draft social performance standards which had been established byvarious stakeholders from around the world. The participating MFIs from Laos whosubmitted their responses were: EMI, Xaniyom NDTMFI, Oudomxay Development NDTMFI,Saynhai Samphanh DTMFI, IFDP Phongsaly NDTMFI, DMI DTMFI. These MFIs had alsoparticipated in the Social Performance Training of Trainers (see under ‘IX.2. CapacityBuilding’ below) and thus had already been sensitized towards the topic. The MFWGmanagement team consolidated their comments and submitted them to the SPTF on 1November 2011 for consideration and inclusion in the final standards which will bediscussed during the next Annual Meeting of the SPTF in Jordan in June 2012. Performance indicators for MFIs established and approved by members (May)During its member meeting on 20 May, a brief overview on the importance of improvingsector transparency and the benefits of introducing internationally acknowledgedperformance indicators for MFIs members was discussed. The benefits of performancereporting are evident as management indicators guide MFIs to monitor key aspects ofbusiness and help guide MFI’s management decisions. Moreover, indicators help MFIs andthe sector as a whole to set up standards and measure the impact of their work. It wasagreed during the meeting that MFIs would report against the following performanceindicators:• Number of total active clients• % of active female clients• Number of urban/rural clientsAnnual Report 2011 Page 18

• Number clients from ethnic groups• Number of active borrowers (female and male)• % Group borrowers• % Individual borrowers• Number of compulsory savers• Number of voluntary savers• Number of branches & service units• Number of villages• Number of staff• Number of credit officers• Gross loan portfolio (LAK)• Group/Individual loan portfolio (LAK)• Total assets• Total equity• Average disbursed loan size (LAK)• Portfolio at risk >30 days+• Number of loans outstanding per credit officer• Operational Self Sustainability (OSS)Public disclosure on internationally recognized standards will improve the reputation andcredibility of MFIs in the sector and with relevant stakeholders (e.g. donors, investors,banks, Government of Lao PDR, Bank of Lao PDR, etc.). It will also help to increase sectortransparency and accountability at industry level as well as access to debt and/or equityfunding (the latter will become important once the Lao Microfinance Decree has beenapproved). Lack of access to performance data of Lao MFIs has been identified as one of thekey constraints of sector development by stakeholders and this activity aims at addressingthis challenge.Moreover, MFWG plans to consolidate the data and publish it on its new website (startingquarter 1 2012) and to use the data to establish benchmarks for the sector as a whole andfor peer groups (i.e. SCUs, DTMFIs, NDTMFIs) to be able to compare performance andprogress against benchmarks over time. This will allow comparisons of MFIs at similarmaturity levels. Once a critical mass of MFIs has submitted their performance data, theMFWG plans to provide feedback to the MFIs on their performance against averages. Thedata can also be used to improve sector planning and coordination as well as to identifyrequired technical assistance to further strengthen the performance of MFIs in Lao PDR. Lastbut not least performance monitoring and national benchmarks are important as they canbe used to compare Lao performance with international performance averages. It was alsomentioned that MFIs can further increase transparency by posting their data on the MIXMarket (Microfinance Information Exchange: www.mixmarket.org). For example SaynhaiSamphan DTMFI, IFDP Phongsaly NDTMFI and EMI are already listed on the MIX. MFWGencourages more MFIs to follow their example. Participation in Asia Network Summit in Manila/Philippines (July)Two MFWG Board of Directors, the office manager and advisor attended the Asia NetworkSummit (ANS) from 26-27 July in Manila/Philippines. The conference was organized by theBanking with the Poor Network (BWTP) of which the MFWG is a member since 2010. TheBWTP Network is the regional network of microfinance associations in Asia. The LaoAnnual Report 2011 Page 19

network representatives participated in sessions on product and service innovation,consumer protection and risk management, managing donor relationships/partnerships aswell as in developing a regional network collaboration strategy. By participating in the ANSthe MFWG was able to update the regional network about MFWG progress and challengesand get to know and share relevant experiences with the other national networks in Asia.MFWG Board Secretary Somchit Douangmixay, Treasurer Somchit Bounleum, Office Manager Viengnakhone Lovanxay andAdvisor Ursula Hammerich attend the ‘Asia Network Summit’ in Manila from 26-27 July 2011 MFWG participation in Annual Conference of the Microfinance Council of thePhilippines (MCPI) in Manila/Philippines (July)Directly after the ANS, the Lao delegation also participated in the Annual Conference of theMicrofinance Council of the Philippines (MCPI) in Manila (28-29 July), which is themicrofinance network of the Philippines. In the two days workshop more than 200practitioners and network members discussed various pressing industry related topics, suchas responsible finance, multiple borrowing, pricing & transparency. The conference was agood learning opportunity for the Lao delegation to see how similar events could beorganized in the future in Lao PDR as well. Mapping data of major microfinance projects and member microfinancepractitioners (July-November)The MWG management team prepared a member profile questionnaire for MFIs and Non-MFIs and submitted it to all members with the request to submit their organizational data tothe MFWG. 21 MFIs and 12 international agencies submitted their data and the MFWGreviewed and added the data to a matrix consolidating all project and MFI information. Thematrixes, which contain amongst others information on the organization’s mission, targetgroups, products and services, lending methodology and geographical focus, weresubsequently added to the new MFWG website with the objective to increase sectortransparency and stakeholder coordination and planning. For more information please see:www.mfwglaopdr.org/media/eng/MappingofMicrofinancePractitioners.pdfwww.mfwglaopdr.org/ media/eng/MappingofMicrofinance Projects.pdf Briefing paper on ‘Institutional Development Performance of MFIs in Lao PDR 2008-2010’ (September)A briefing paper on ‘Institutional Development Performance of MFIs in Lao PDR 2008-2010’was prepared by Shane Nichols, former Team Leader of the BOL-ADB funded ‘CatalyzingMicrofinance for the Poor Project’ based on the findings from a survey undertaken underAnnual Report 2011 Page 20

participate in sessions and events designed specifically to address key issues facingassociations today. Mr Sisoukda was granted a scholarship to attend the event and was alsopanelist in the workshop on ‘Audit & Governance: Use of Director’s Internal Audit Guide’. Healso actively engaged in the ‘Social Performance Working Group’ meeting which wasorganized as one of the side events of the conference. The 4-days summit also offeredworkshops on multiple topics such as financial education, client protection, youth financialservices, microenterprise development, new developments in product and serviceinnovation, responsible finance, mitigation of industry risks and new frontiers in associationdevelopment.MFWG Chair Bandith Sisoukda participated in the ‘12 th SEEP Global Network Summit’ in Arlington, VA/USAfrom 31 October - 3 November 2011 SBFIC Board of Trustees from Germany visits MFWG (October)On 31 October the SBFIC Board of Trustees from Germany visited the office of MFWG toreceive an introduction to the development of the microfinance sector in Lao PDR and anoverview of the MFWG strategic plan, its services offered and future activities.SBFIC Board of Trustees from Germany visited the MFWG on 31 October in Vientiane

The delegation comprised 15 high level savings bank representatives from different regionsof Germany who travelled Laos and Vietnam to visit partner organizations of the SBFIC’sregional microfinance program. The program comprises partners in Laos, Vietnam andCambodia. SBFIC supports four partner institutions in Lao PDR alone, namely MFWG, WFDF,EMI and MFC. MFWG Vice-Chair and advisor attended SBFIC Regional Microfinance Conference inLuang Prabang with program partners from Vietnam, Cambodia and Laos(November)The annual conference of the SBFIC’s regional microfinance conference took place in LuangPrabang from 3-4 November and was attended by 23 program partners from Vietnam,Cambodia, Laos and the Philippines. This annual conference is organized by SBFIC for directregional project partners only and the MFWG was represented by its Vice Chair and theSBFIC advisor. The annual event‘s main objective is to gather program partners to createsynergies, share expertise and best practices from the region among program partners. Thefocus topic of this year’s workshop was dedicated to the: ‘Importance of Savings’. Theparticipants were grouped in two different workshops in the afternoon session of theconference: 1. Market research, target groups, demand-driven savings products andtechnologies, marketing and 2. Financial aspects (low operating and transaction costs,efficient delivery/distribution channels). In each workshop the partners developed a list ofthings to consider and to avoid when developing savings products and the findings wereshared with all participants. Based on the findings from the presentations each partnerinstitution was requested to develop its own savings mobilisation strategy (including thepossible implementation of lottery savings if feasible in the given country context) and tohold discussions regarding this strategy in quarter 1 2012. SBFIC will send a short termexpert to Laos to provide follow-up support on the topic in 2012.SBFIC Regional Project Partners from Laos, Vietnam, Cambodia and the Philippines(including MFWG representatives and members) gather in Luang Prabangfor the ‘Annual Regional Microfinance Conference’ (3-4 November)Annual Report 2011 Page 23

MFWG formally launched new MFWG bi-lingual website (Lao and English)(December)On 5 th December 2011 the MFWG officially launched its new bi-lingual (English & Lao)website (www.mfwglaopdr.com). This new site which was designed by MFWG with supportfrom X-Eye firm and GIZ-AFP intern Patrizia Matzdorf, has a lot more information on the Laomicrofinance sector than the previous one and most of the data is now also available in Laolanguage. The site provides information on the MFWG (background, organizationalstructure, activities, members, membership criteria) as well as detailed information on themicrofinance sector in Lao PDR. As one of the MFWG’s key mandates is to promote sectortransparency, microfinance information from relevant stakeholders was collected and thewebsite now also comprises a mapping of registered MFIs in Lao PDR and majormicrofinance projects. For the first time microfinance stakeholders can access informationon Lao formal MFIs and their products & services offered as well as microfinance projectswhich provide support on various microfinance sector levels (macro, meso and micro). Wetrust that this information will help stakeholder cooperation and improve coordination ofsector activities. The ‘Resources & Publications’ page of the website has been expandedgreatly and comprises major research and studies related to the Lao microfinance sector aswell as tools and training materials specifically tailored to the Lao context. It also includesLao microfinance forecasts and statistics, media articles, briefing papers, etc. There is also aseparate page dedicated to ‘Policies & Regulations’ which provides an introduction to theLao regulatory framework and relevant microfinance regulations and policies. The ‘Newsand Events’ page informs about future (see ’Coming Up’ sub-page) and recent events (see‘Workshops and Trainings’ and ‘News’ sub-pages) related to the MFWG and microfinance inLaos, regionally and internationally. The MFWG Management Team was able to add theinformation thanks to its members and stakeholders who submitted their data and agreedto share it with the public. GIZ-‘Access to Finance for the Poor Project’ sponsored theestablishment of this new website. Stakeholders were encouraged to send MFWG otherrelevant documents (reports, research, relevant literature, training materials, etc.) theywant to share with the sector and the feedback and reviews so far have been very positivethroughout. MFWG participated in the Microfinance Stakeholder Forum 2011 in Vientiane(December)MFWG Board and Members attend the Microfinance Stakeholder Forum in Vientianeorganized by Bank of Lao PDR on 7 December 2011Annual Report 2011 Page 24

The Bank of Lao PDR held its annual Microfinance Stakeholder Forum on 7 December 2011in Vientiane. The one day workshop gathered microfinance practitioners, Governmentofficials from all over the country as well as donors, bi-multi-lateral agencies, INGOs todiscuss developments and trends of the microfinance sector in Laos since its last forum heldlast year in December.The forum was opened by Deputy Governor of Bank of Lao PDR, Mr BounsongSommalavong, at the International Cooperation and Training Center. GIZ, UNCDF and ADBpresented their microfinance programs and progress made since last year. Variouspractitioners were given an opportunity to update the sector on recent productdevelopments, human resource strategies and ways on how to increase outreach to thepoor. During the panel discussion and question and answer session in the afternoonstakeholders had an opportunity to raise issues related to sector development and jointlydiscuss ways forward to further develop and improve the sector. The forum was supportedby UNCDF and GIZ. External Relations/Sector Representation (January-December)Regular meetings were held with BoL to update representatives from the FinancialInstitutions Supervision Department (FISD) about MFWG activities and progress made aswell as to discuss issues affecting the sector, the feasibility of creating a microfinancecertificate course, etc. (see also section on ‘IX.3. Advocacy’ for more details).MFWG also provided sector information, etc. to new market entrants or those consideringto enter the sector or doing market research, such as Entrepreneur du Monde (MFIestablishment), Watershed Asia (linkage of MFIs and WASH products), KfW (financialcooperation with Lao and international banks), World Granny (financing of disadvantagedpopulations), French Embassy (SME development), BBVA Microfinance Foundation Spain(mobile banking) and Garuna Project (MFI greenfielding).Moreover, the MFWG participated in the mid tem project evaluation of GIZ-AFP and in theworkshop summarizing findings and recommendations from the mid-termreview/evaluation of the ADB funded ‘Northern Regional Sustainable Livelihoods throughLivestock Development Project’ (SWOT).A meeting was held with Planet Finance/ADB to discuss refinancing options for MFIs in LaoPDR and with AMK, the biggest Cambodian MFI and AGORA Microfinance Fund to discussthe possibility of foreign debt and equity investment in microfinance in Lao PDR. MFWG alsoprovided Oikocredit with sector information to consider social investment in developed LaoMFIs. It also held discussions with KIVA, an international debt funding agency about possiblepartnerships with Lao MFIs.The MFWG also established monthly informal roundtable discussions with donors andinternational agencies (GIZ, UNCDF, ADB) who work on policy level in microfinance in LaoPDR to identify relevant issues and topics and to improve coordination among these partneragencies.Annual Report 2011 Page 25

In addition, MFWG participated in the sector working group meeting organized by GIZ togather all German partners working in programs/projects related to sustainable economicdevelopment in Lao PDR. MFWG was requested to act as focal point for any microfinancerelated requests (knowledge management/information transfer). As microfinance networkit is well positioned to do so as it aims at becoming the information hub for the sector.Following the meeting the MFWG took a first active step to discuss the feasibility of creatinga donor roundtable or forum for all donors/bi-multi-lateral agencies/INGOs working inmicrofinance in Lao PDR with the objective of creating synergies among theseprograms/projects and to improve donor coordination and cooperation. Feedback fromvarious donors indicates that there is demand to establish such a roundtable/task force andthe MFWG therefore will pursue to organize a meeting with all relevant agencies in 2012.IX.2. Capacity Building & Training MFWG members participated in ‘Loan Quality Management Training’ by ARMTC(March)GIZ-AFP & Bank of Lao PDR in partnership with MFWG organized a ‘Loan QualityManagement (LQM) Training’ which was delivered by ASEAN Regional Microfinance TrainingCenter (ARMTC) of ACELDA Bank Plc., Cambodia. The training took place from 14 – 18 March2011 for microfinance practitioners at the Lao Women’s Union Training Center in Vientiane.Thirty trainees from MFIs (DTMFIs and NTDMFIs), SCUs, associations of village banks, andBank of Lao participated in the training which was funded by GIZ and KfW. The trainingaimed at improving the skills of loan officers in assessing loans, improving loan applicationprocedures, delinquency management and establishing sound credit policies andprocedures.30 trainees from various microfinance institutions participate in the ‘Loan Quality Management Training’ by ARMTCThe workshop was well perceived by the trainees who highlighted in their trainingevaluation that the trainers were professional and experienced in providing training on thetopic and that the content was highly relevant to their daily work. The participatoryapproach and teaching method actively engaged all trainees. However it was alsohighlighted that future trainings should provide more time to focus on practical exercisesrelated to the Lao context and a question and answer session to discuss individual cases.Participants also mentioned that training should be conducted in Lao language only.Annual Report 2011 Page 26

MFWG conducted training needs analysis and developed training strategy for thenetwork (March)The MFWG created a questionnaire to identify training needs of Lao MFIs and to develop atraining strategy for the network. 22 MFIs and 7 Non-MFIs responded to the questionnaire.The data, findings and recommendations were consolidated and subsequently presented tothe HRD Task Committee of the network. Main findings and feedback from MFIs were:Priority training topics identified and requested by practitioners were credit & delinquencymanagement, internal control/audit, microfinance accounting, financial managementanalysis, and market research & product development. Respondents also indicated that theywould be willing and capable of paying for quality training (20-50 US$/day/participant) andthat field staff would require training most urgently. MFI highlighted the importance ofcreating meaningful training materials (adapted to Lao context), avoiding too much theory(and focus on practical parts instead) and selecting a microfinance professional as a trainer(ideally a microfinance practitioner). It was highlighted that more focus should be placed ongood time management, and that training materials should always be provided in soft copy(CD) to enable MFIs to revise the content to their needs. Post-training evaluations shouldtake place to assess whether MFIs managed to put theory into practice. Foreign trainersshould only provide training if it can be ensured that there will be appropriate and correcttranslation of the training content and use of correct microfinance terminology.Other recommendations from Non-MFIs (donors, international agencies, INGOs, serviceproviders) included the need to develop a sector-wide, comprehensive microfinancecurriculum (basic modules, add on later) embedded in a training institute (privately orGovernment run) and the request for more interactive training which is less frontal. A mix ofvarious training techniques should be applied consisting of some theory, exercises,homework, distance learning and adaptation to local conditions. Moreover, it was suggestedthat all formal training activities need to be complemented with individual follow-up andtechnical support to MFIs to reinforce training outcomes and support adoption of improvedsystems within the MFI (e.g. CMP project). Internships are highly valued among practitioners(more than formal training) and should play a more dominant role in the future. It is alsovital to ensure that training success and impact on skills of participants and within the MFI isevaluated post-training. Also, a careful selection of trainees is pivotal to bring aboutorganizational change post training. MFWG Human Resource Development Task Committee established TOR (May)In October 2010, the MFWG set up a HRD Task Committee to jointly analyze current trainingdemand and supply, outline gaps and develop strategies based on the findings to addressidentified gaps to improve human resource development in MFIs in Lao PDR.Sebastian Behrle was appointed to be the coordinator of this new Task Committee whichclosely coordinates with the MFWG management.The HRD Task Committee is composed of local training service providers, donors/bi-multilateral agencies/(I)NGOs and microfinance consultants/resource persons involved in humanresource development of MFIs. Specific objectives or tasks the committee aims to achieveare as follows:a) Conduct an annual training needs analysis (survey) and present findings fordiscussion and for development of training provision strategiesAnnual Report 2011 Page 27

) Facilitate demand and supply of microfinance training in Lao PDR (MFWGacts as a training broker responsible for client contact, organization andevaluation while the local training service providers actually deliver thetraining)c) Act as an ‘information hub’ on available microfinance training courses in LaoPDR (collect training packages, establish soft/hard copy MF training library,disseminate info on available packages and put on MFWG website)d) Establish a list of trainers, consultants, practitioners, advisors, resourcepersons, etc. qualified in providing training and individual follow-up/coachingof MFIs and share the list with interested practitioners, donors, etc. who havean interest in using their servicese) Establish a list of internship host MFIs and liaise with interns. MFWG toestablish internship terms of reference, prepare host MFIs, establish feestructure, post-internship evaluationf) Coordinate with stakeholders involved in microfinance training and jointlydevelop a HRD strategy to improve MFI skills and capacity by supporting theintegration of modularized courses in all areas of microfinance management(governance, credit & delinquency management, MIS, HR, business planning,accounting, fin mgt, internal controls, etc.) into a formal tertiary educationcurriculum leading to recognized qualification (e.g. 3 modules – certificate, 6modules = diploma, etc.) with each module involving a combination ofcenter-based teaching, self-study, practical assignments, peer learning andon-site support embedded in Government or private training institutesg) Introduce a certification system for microfinance trainersThese ToR were approved by the members of the HRD Committee on 27 May 2011. Certificate course in microfinance management discussed with local trainingservice providers and BoL-FISD (July)Following the formation of the Human Resource Development Task Committee (HRD) of theMFWG and the establishment of its terms of reference which includes among others alsosupport in establishing a certificate course in microfinance management, the committeeconducted consultations with BOL-FISD and training service providers to discuss thepossibility to establish such a course with MFWG’s coordinating support. While allstakeholders were united in supporting the establishment of such a course, the detailedmodalities of the course are still unclear. BOL-FISD wishes the MFWG to establish acompulsory certificate course, the consulted training service providers and also othermicrofinance stakeholders however are not supportive of this idea as they feel it mightundermine training quality and demand. Following a consultative meeting with trainingservice providers and resource persons on 1 July, the MFWG submitted the meetingresults/minutes to the BOL-FISD for comment and feedback. The MFWG would be willing tosupport the establishment of a non-compulsory course provided that another donor canguarantee additional funding and technical expertise (training expert) as the network hasvery limited human and financial resources. It is also felt that the establishment of acertificate course in microfinance management is more urgent than the establishment of aAnnual Report 2011 Page 28

Bachelor Degree and as it would address the current skill gaps of MFI staff more effectivelyand swiftly. Training of trainers conducted on ‘Social Performance Management’ (August)The MFWG organized a 4-days training of trainers on ‘Social Performance Management’ (15-18 August) with 25 trainees with support from Plan International and Microfinance Councilof the Philippines (MCPI) and funding from SEEP and ADA. The 23 trainees includedrepresentatives from local training institutes, consultants and resource persons working inmicrofinance, Central Bank and Banking Institute staff, microfinance practitioners anddonors/INGOs. This was the first time that a social performance training was conducted inLao PDR and its main objective was therefore to identify weaknesses and challenges thatMFIs in Laos face and ways to improve their social performance. Trainees identified anurgent need to better tailor their products to the needs of MFI clients to improve outreachto the poor. They also considered the lack of a poverty assessment tool (like PPI, PAT, PWR)a major constraint to reliably assess progress made towards the poverty alleviation effortsundertaken by MFIs and other stakeholders in Laos. The participants also appreciated tolearn more about the MIX social reporting and indicators and the benefits of improvingsector transparency. The practitioners will require support from the MFWG to submit datato the MIX in the future. At present there are only 3 MFIs and one bank from Laos listed onthe MIX. Moreover, the participating MFIs conducted the SMART Campaign Self-AssessmentQuestionnaire to identify key areas of client protection which need to be improved. All sixclient protection principles (prevention of over-indebtedness, increase transparency,responsible pricing, appropriate collection practices, ethical staff behavior, complaintshandling and resolution, privacy of client data) require more attention in Laos in the future,in particular the issue of increasing multiple-borrowing of clients, and the lack oftransparent and responsible pricing. On the last day of the TOT, the MFWG drafted its socialperformance strategy which was integrated in the overall strategic plan of the network forthe period 2012-2014.‘Social Performance Management Training’ in action (15 – 18 August in Vientiane) –with support from ADA, SEEP, MCPI and Plan International Training on ‘Credit & Delinquency Management’ conducted (September)Based on the findings of the training needs survey which the MFWG conducted in Marchand within its mandate to support and provide capacity building in microfinance, the MFWGin partnership with Microfinance Training Center (MFC) conducted a training on ‘Credit andAnnual Report 2011 Page 29

Delinquency Management’ from 12-16 September in the Ministry of Education Guesthousein Vientiane, Lao PDR. The 24 participants were from Non-Deposit Taking Microfinance(NDTMFI), Deposit Taking Microfinance (DTMFI), Savings & Credit Unions (SCU), CommunityCredit and Saving Association (network support organizations) and Village Banks. Theworkshop provided a practical, step-by-step overview of how MFIs manage the lendingprocess – from the first contact with the client through to closure of the loan. It aimed atproviding answers to questions such as ‘Who should I (not) lend to? How do I know howmuch to lend? How do I know the right loan term and repayment structure? What could becauses for a late loan? What do I do when the loan is late? How much does it cost when aloan is late?’ The workshop was formally opened on Monday, 12 September by Mr.Amphone Aliyavongsing, Deputy Director of Financial Institution Supervision Department ofBank of Lao PDR, Mr. Bandith Sisoukda, Chair of MFWG, Mr. Sebastian Behrle, HumanResource Development Task Committee Coordinator of the MFWG and Mr. SomphoneSisenglath, Director of MFC (Lead Trainer). The overall consolidated training evaluationscore was high with 4.42 out of a maximum score of 5 for this training. Trainees particularlyappreciated the high level of competence of the trainers (4.67) and felt that they had gaineduseful knowledge, tools and perspectives for their work (4.50). A lower overall score wasgiven for the time allocated for the training (4.21). The majority of trainees actively engagedin the workshop throughout the entire duration and demonstrated good results in themultiple choice quiz which was conducted in the mornings to assess the skills level of everyparticipant and level of understanding of the topic. This was the first time that the MFWGcharged a training fee of US$125 per trainee in order to reduce donor dependency and witha view to be able to provide training on a cost covering basis and thus be able to providemore relevant microfinance training also in the future. Trainees generally reacted positivelyto the introduction of the fees mentioning that the training fees were appropriate and thatthey are willing to pay for training if the quality was good.24 trainees participated in the ‘Credit & Delinquency Management Training’ organized by MFWG and MFC(12-16 September) in Vientiane Prepared training agenda, training materials and logistics for ‘Board GovernanceTraining’ and signed MoU with local trainer (November-December)Another training topic which had been requested by the majority of practitioners was‘Board Governance and as a consequence, the network invited local training serviceproviders to submit their proposals to conduct a Board Governance training for MFI Boardmembers for the MFWG following the previously held ‘Credit & Delinquency ManagementTraining’. Vanhsy Chindavong was selected as the most qualified trainer to deliver the threeAnnual Report 2011 Page 30

days training as she has trained many MFI and village bank Board members on the topic inthe past. Due to the trainer’s unavailability in December, the training had to be postponedand will take place from 24-26 January 2012 instead. The MFWG has prepared a Board selfassessmentquestionnaire for the training which each trainee is requested to complete andtrainees are also requested to participate in a quiz/test to enable MFWG to assess thetraining efficiency and each trainee’s performance over the training period of three days. Added more Lao microfinance training materials to the MFWG reference libraryThe MFWG added more training materials to its MFWG reference library (business planning,Board governance, delinquency management, credit management, accounting). Thematerials are all tailored to the Lao context and available in both languages (Lao andEnglish). Office manager attended a three days ‘Leadership Training’ delivered by MFC andsupported by SBFIC (October)Eleven trainees from NDTMFIs, DTMFIs, the Lao Postal Savings Institute, SCU, Bank of LaoPDR, microfinance resource persons and MFWG network staff (Office Manager) attended athree days leadership training (5-7 October 2011) in Vientiane organized and delivered byMFC and funded by SBFIC. The training content comprised an introduction to differentleadership styles, team work/team building processes, delegation techniques,communication techniques as well as time and conflict management.The MFWG Office Manager Viengnakhone Lovanxay attended the ‘Leadership Training’ organized by MFCwith support from SBFIC (5-7 October) in VientianeAnnual Report 2011 Page 31

XI.3. Advocacy Statement submitted to BOL summarizing issues affecting the microfinance sector(October)Consultations were held with 27 MFIs and microfinance stakeholders prior to and during themember meeting on 3 October to discuss various policy issues which negatively affect thedevelopment of the microfinance sector with the objective to jointly address these with therelevant Government Authorities. The identified issues relate to three key areas:1. Clarify the procedures for business registration of MFIs2. Clarify tax regulations for MFIs (BOL chart of accounts not accepted by taxauthorities, loan loss provisions are not recognized as tax deductible expenses and3. Clarify membership of MFIs in the depositor protection fund.Following the meeting, the MFWG prepared a statement summarizing the comments madeduring the meeting together with suggested solutions to the problems and submitted it toBOL on 26 October. On 18 November, the MFWG Chair and advisor met BOL-FISD to discussnext steps to be taken to address these issues and BOL-FISD assured MFWG that they wereaware of the issues and had taken first steps to meet with LNCCI, the tax department anddepositors protection fund to address these problems.XI.4. Organizational Development MFWG office opened & office manager started work as first full-time staff ofMFWG (January)The new MFWG office was opened in central location in Vientiane Capital in January and theoperations were fully established. The new office manager of the MFWG started work on 18January and was introduced to her job. Documentation, filing and accounting systems (hardand soft copy) as well as a monitoring system of expenses versus budget were alsoestablished. The accounts are controlled on a monthly basis by the advisor and treasurer ofBoard of Directors. Contact list and email roster updated regularly (January – December)The MFWG contact list and email roster was updated regularly and the latter comprised 273addresses (Status: 31 December) who receive regular emails from the MFWG regardingupcoming events, meetings, workshops, trainings, etc. Donor liaison - Funding support secured for 2011 (January - December)ADA, SBFIC and GIZ confirmed their continuous financial and technical support to MFWG in2011. Moreover, UNCDF and MFWG established a Memorandum of Understanding outlininga partnership contract for 2011.MFWG also hosted various visits from representatives of donor and support agencies suchas Niclaus Bergmann, SBFIC Managing Director, Nicole Brand, SBFIC Project Manager as wellas Wendy Medrano-Lazo, ADA Project Officer to discuss MFWG progress, challenges, futuresupport options, other sector needs, etc.Annual Report 2011 Page 32

MFWG fulfills regular reporting requirements (vis-à-vis BoD, BoL, funding agencies)(January-December)The MFWG wrote its first Annual Report since the establishment of the network. The reportcovers the period January-December 2010 and the document was shared with its members,donor, international agencies and interested parties to raise awareness about the activitiesof the MFWG and future plans.Moreover, the MFWG management team prepared monthly progress reports and workplansfor the coming month (in English and Lao) and shared it with the Board of Directors andBank of Lao PDR. In addition, monthly reports were prepared and submitted to SBFIC (inGerman) and quarterly reports to UNCDF-MAFIPP (in English). The MFWG also preparedthree contributions summarizing MFWG’s main achievements to the SBFIC Newsletter andcontributed to the Annual Report of the SBFIC Regional Project. New Board of Directors elected and six (bi-monthly) meetings held to discussMFWG progress and future activities (March)The MFWG elected a new Board of Directors during the General Assembly which was heldon 4 March 201. The two Co-Chair positions (one local, one international) were given up infavor of one Chair position which is filled by a Lao national. The Co-Chair Ursula Hammerichresigned from her position to become the advisor to the MFWG and the other Co-ChairBandith Sisoukda was elected Chair of the MFWG during the same meeting. ChanthaMingboupha, DTMFI EMI was re-elected (Board member) and three new members alsojoined the Board, namely Saysamone Kouanmeungchanh, Director of Saynhai SamphanDTMFI (Vice-Chair) and Somchit Bounleume, Director of DMID DTMFI (Treasurer) andSomchit Duangmixay, Manager of Oudomxay Development NDTMFI (Secretary). This newgovernance structure will enable the Lao members to take on more responsibility andownership in establishing a Lao run network that represents the microfinance sector as theBoard of Directors now consists of members from four leading microfinance institutions inLao PDR and one international agency who are based in different regions of Lao PDR andthus also function as multipliers or communication channels to MFIs located in more distantlocations in the North and South of Lao PDR.The advisor provided an introduction of the Board Directors to their new role during the firstBoard of Directors meeting held on 20 May using selected SEEP Board governance trainingmaterials (roles and responsibilities, code of conduct/oath of office).Overall six BOD meetings were held in 2011 to discuss the by-laws/formalization of MFWGand progress reports, future activities, by-laws as well as the strategic business plan ofMFWG.At year end a self-assessment format for the Board of Directors of MFWG was prepared torequest the Board Directors to critically assess their Board performance in 2011. Thequestionnaire was sent out on 15 December to all Board Directors and the responses will beconsolidated and discussed in the first Board meeting in February 2012. MFWG established membership criteria and membership fee structure (May &December)When the MFWG started its activities in 2007 there was no formal membership and nomembership fees were charged due to the fact that no regular activities took place and theAnnual Report 2011 Page 33

network did not have a permanent secretariat to manage membership. This changed in2011 when a formal membership was introduced outlining general member rights andduties. It specifies that members have the right to: full access to network resources and sector information (e.g. MFWG library, MFWGwebsite, sector surveys, market forecasts, training materials, microfinanceperformance & statistics) participate in any activity organized by MFWG (meetings, trainings, internships,events, workshops, etc.) inform the MFWG about any issues affecting sector development (to be addressedthrough the MFWG by lobbying with relevant Government Bodies) receive updates on recent developments in microfinance (product & serviceinnovation, microfinance policies, etc.) contribute ideas to plans and operations of the MFWG one vote at MFWG meetings (Board elections, etc.) be nominated and elected as Board of DirectorIn return, members are obliged to: be dedicated to best practice microfinance principles contribute to improve transparency and coordination of the microfinance sector share useful resources (reports, books, links, DVDs, contacts, etc.) share relevant experiences in microfinance (reports, best practices, etc.) share new developments observed / expected and announce new and relevantevents coming up call meetings when felt necessary prepare presentations / discussions about working group topics provide follow up on decisions / agreements taken by the network pay any (membership) fees charged by the MFWG in accordance with the MFWG’srulesThe MFWG prepared and approved a revised membership format (20 May 2011) which wassent out to microfinance stakeholders in Lao PDR. By 31 December 2011 the network had 36members, comprising 21 microfinance practitioners (i.e. 3 Deposit-taking MFIs, 8 Non-Deposit-taking MFIs, 8 SCUs, 2 Network Support Organizations), 9 donors/bi-/multi-lateralagencies/INGOs and 6 microfinance service providers (training institutes, resource persons).With 21 regulated MFIs being a member of the MFWG, the membership becomesincreasingly more representative for the Lao microfinance industry as 62% of all formal MFIsin Laos are already members of the MFWG. It is assumed that the number will continue toincrease over time as the network undertakes active marketing/awareness raising andrecruitment of members.Presently, the MFWG does not distinguish between different types of membership (e.g. fulland associate members) as is the case with many other microfinance networks worldwide.This reflects the egalitarian approach towards membership, the importance of which hasbeen emphasized by the members and Board of Directors of the MFWG at variousmeetings/workshops and events.Annual Report 2011 Page 34

Given the nascent stage of the sector the network clearly pursues an inclusive approach tomembership where MFIs are encouraged to become a member even if they are not fullycompliant with good microfinance practice yet. They also do not have to adhere to acommon code of conduct or to be in line with internationally accepted benchmarks yet (e.g.age, minimum number of borrowers, PAR levels) as most MFIs would not be able to fulfillthese requirements yet due to the young age of most of these MFIs. Membership at thisstage is seen as a way to assist the prospective good practice providers to learn from othermore established and advanced MFIs. This is a sensible approach in a country with a youngmicrofinance industry where mutual learning plays a prominent role and where there is anurgent need to share information and cooperate. However, MFWG will pursue theestablishment of a common member code of conduct as the sector develops and thenetwork professionalizes.In order to bring membership in line with the legal framework of the Association Decree theBoard and Management Team of the MFWG has revised its membership structure which isalso reflected in the new by-laws which were approved in December 2011 by the Board ofDirectors and which outline the two types of membership:Members will include (1.) organizations who are established under Lao law or under foreignor international law who are permitted by concerned authorities to undertake microfinanceactivities in the Lao PDR and which are committed to sustainable microfinance practicesand:a. who provide financial (savings, loans, insurance, etc.) and/or other non financialservices (business development services, financial literacy, etc.) to poor and lowincome populations in Lao PDR (such as banks, deposit-taking MFIs, non-deposittakingMFIs, savings & credit unions, network support organizations/associations ofvillage funds/village revolving funds/village development funds).b. who provide microfinance training, capacity building, coaching and consultancyservicesc. who engage in (micro-) finance research (such as academic institutions)d. (inter-)national organizations (e.g. donors, (I)NGOs, bi-/multi-lateral agencies) whichrun microfinance projects or projects with a microfinance component and whichcontribute to the development of sustainable microfinance services in Lao PDR bysupporting a., and/or b., and/or c.and (2.) Lao Citizens who are established under Lao law and permitted by concernedauthorities to undertake microfinance activities in the Lao PDR and which are committed tosustainable microfinance practices. This excludes moneylenders but includes individuals thatprovide microfinance training, capacity building, coaching and consultancy services andengage in microfinance research.The MFWG does not charge membership fees at present because the network has not fullyestablished its services yet and due to the findings from the research study undertaken in2010 which stated that the majority of stakeholders were not in favor of introducingmembership fees 3 at the time mainly due to the poor financial performance of the majority3 Michael Kuehl, ‘Final Report on The Status Quo of the Lao MFWG’, SBFIC 2010, p. 35fAnnual Report 2011 Page 35

of MFIs. However, profitable MFIs indicated that they would be willing to pay provided thatthe network would offer qualitatively satisfying services. In 2011, the Board andManagement Team revived the membership fee discussion at various occasions (membermeetings, strategic planning workshop) and the feedback from these discussions was clearlysupportive of the idea to introduce membership fees. However, it was appreciated by themembers that some young, small MFIs would find it difficult to pay a high amount. It wastherefore suggested to introduce a staggered fee system related to the portfolio size of anMFI. The members delegated the final decision on setting the membership structure to theBoard. In the Board meeting on 6 December, the Board of Directors agreed on amembership fee structure for 2012 which follows a graded system related to the portfoliosize of an MFI (see table 1 below).Table 1: MFWG Membership Fee Structure (approved by Board of Directors)Ref Member Category Loan Portfolio Size AnnualMembershipFees 2012I. PractitionersLAK US$ LAK US$A Practitioner A Kip 1 - 3 +/> 125,000-375,000 400,000 50billionC Practitioner C > Kip 3 – 5 billion >375,000-625,000 600,000 75D Practitioner D >Kip 5 – 10 >625,000-1,250,000 800,000 100billionE Practitioner E >Kip 10 billion >1,250,000 1,200,000 150II.III.Donors, Bi-, Multi-Lateral Agencies,(I)NGOs, ServiceProviders(Institutions)ResourcePersons/Consultants1,600,000 200300,000 38This decision is an important first step to contributing towards the financial sustainability ofthe network and will certainly have a positive impact on member commitment and networksupport. It is planned to increase the amount incrementally year by year in line withnetwork’s growth and service delivery Two - days planning workshop conducted to develop MFWG strategic business planfor 2012-2014 & first draft plan finalized (July-December)Since the establishment of the MFWG, the network’s activities were guided by annualworkplans and no medium term strategic plan had been established for the network.Members, donors and practitioners alike felt that there was an increasing need to developAnnual Report 2011 Page 36

such a plan to better guide the future of the emerging network and to jointly develop avision of where the network wants to be in three years time. As a consequence, the MFWGconducted a strategic planning workshop with 16 MFWG members (MFIs, donors, serviceproviders) from 2-3 July and developed a draft strategic planning framework for the MFWGfor the period 2012-2014. The strategic framework was further refined and approved by theBoard of Directors in a subsequent Board meeting. It was used as a basis to develop thedraft MFWG Strategic and Business Plan which was prepared and finalized in December2011 by the MFWG advisor. It comprises the vision, mission, core values of MFWG, goalsand strategic objectives, as well as a summary of its stakeholders, governance structure,management and staffing requirements, membership and fees structure, critical successfactors, a detailed operational plan as well as a budget and financing plan for the next threeyears to come. The draft plan will be finally reviewed with the Board of Directors andmembers in early 2012. MFWG by-laws finalized and approved by Board of Directors (May-December)The MFWG drafted its by-laws based on the requirements as stipulated in the AssociationDecree. The first version was jointly reviewed with a reputed Lao lawyer, the MFWG Boardof Directors and management team. Based on the review and comments on the 1st version,the 2nd version was finalized for review by an international lawyer who submitted hiscomments and suggestions for further improvement of the by-laws. These were thenfurther discussed and refined with the Board and the final version was submitted to BOL forreview and comment on 18 November. The MFWG Board approved the final by-laws duringits 6 th meeting on 6 December (version 3.3). MFWG prepares to become a formal entity (June – December)Since the beginning of the MFWG, the informal status has been increasingly hampering thefull development and functioning of the network and in 2011 MFWG members clearly optedto formalize the network for the following reasons:1. Formalization would facilitate contacts and talks with Government authorities andministries2. It would build confidence and trust and make MFWG more credible vis-à-visGovernment, donors and its members as it would demonstrate that the network’smandate and activities are compliant with the legal framework conditions andpolitical objectives3. Formalization is often a precondition for donor funding and technical cooperation (inthe past some donors could not support MFWG due the lack of legal status)4. Formalization would broaden scope for action (i.e. draw and enter into contracts)5. It would be easier to recruit new members as a non-formal status is interpreted bysome as dubious6. It would be easier to attract and retain qualified staff7. A binding and transparent structure and workflow organization would preventmisuse8. Clear structures and specified decision-making processes would give the networkdemocratic legitimacy and as a result power of representation 44 Ibid., pp 22-23Annual Report 2011 Page 37

Based on this decision, the MFWG management team and Board Directors investigatedvarious options available and most suitable to become a formal organization in Lao PDR.The MFWG management team organized meetings with PACSA and LNCCI to discussregistration options to formalize as non-profit association, business association orfoundation. Based on the discussions held it was decided that formalization as amicrofinance association is the best option for MFWG. The ‘Decree on Associations’ 5 datingApril 2009 generates the legal framework that would enable the MFWG to become a nonprofitmicrofinance association. The decree is geared to the general standards for goodpractice and complies with the global standard network structure that has proven to beefficient and successful. As a national level association 6 , the MFWG would have the right tooperate nationwide and may open representative offices or branches subject to theapproval of local administrative authorities and organizations concerned. 7The association structure as outlined in the decree would be in line with the presentorganizational structure of the MFWG which consists of the General Assembly, the Board ofDirectors, Task Committees and Executive Office (Management Team).The network subsequently started preparing required documents for the establishment ofan association mobilizing committee (detailed CVs of committee members, etc.) and heldanother meeting with PACSA on 22 December in which the MFWG was advised to furtherrefine the documents by using newly created formats. Once complete, the MFWG willsubmit these documents for PACSA’s reference. PACSA will then verify the submittedinformation on the committee members and inform MFWG about next steps. Six member meetings (including Annual General Assembly) conducted (February-December)The MFWG conducted six member meetings including the annual general assembly and thestrategic planning workshop. Please see the table below for more details regarding themeetings and focus topics:Ref Date Topic Presented/Facilitated by Participants1 1 February ‘Roadmap to a Lao ManagedMicrofinance Network’, MainFindings from MFWG StudyProgress reportSBFIC ExternalConsultantMFWG Advisor232 4 March MFWG Annual GeneralAssembly, Election of Board,Results 2010, Workplan &Budget 20113 20 May Membership Criteria,Member ProfilesPerformance IndicatorsProgress ReportMFWG Chair,MFWG TreasurerMFWG AdvisorMFWG Chair &MFWG Advisor4 2-3 July MFWG Strategic Planning External Facilitator 1627295 PMO, ‘Decree on Associations’, No. 115/PM, April 20096 Ibid, Article 9, p.37 Ibid., Article 43, p.12Annual Report 2011 Page 38

Workshop (2012-2014)5 3 October Issues Affecting theMicrofinance SectorProgress Report6 5 December Launch of Bi-lingual MFWGWebsiteProgress ReportMFWG ChairGIZ-AFP Project DirectorMFWG AdvisorMFWG Chair/AdvisorMFWG Advisor6 Feb-Dec ‘11 TOTAL 1432820The MFWG organizes regular (bi-monthly) member meetings with identified focus topics of sector interestAt the end of each meeting the MFWG conducted a workshop evaluation and consolidatedthe information. The results from the evaluation were used to develop topics and discussionrounds for future meetings (demand based approach). Additional office equipment received with funding support from GIZ-AFP Project)(November-December)GIZ-AFP granted MFWG more equipment to sufficiently equip the office for 2012 andbeyond. The new equipment comprises a server desktop, laptop, heavy duty printer, smalltable printer, office chair, meeting chairs, shelves and two flipcharts. All equipment (exceptone shelve and one flipchart) were delivered in December and have been fully installed. MFWG brochure designed (English and Lao) (December)A MFWG brochure was designed (Lao and English). The brochure was created to raiseawareness (marketing) and membership of MFWG in Lao PDR and abroad. Conducted performance appraisal with office manager and renewed contract(December)The advisor and Chair conducted a performance appraisal based on the job description withthe office manager. Based on the positive outcome/assessment the contract was extendedfor another year (2012). ToR for MFWG audit established and submitted to audit firms (December)As an organization which is committed to good governance and transparency, the MFWGundertook its first financial audit in February 2012 for the financial year ending 31December 2011. It established terms of reference to conduct the audit and submitted it toAnnual Report 2011 Page 39

major international and local auditing firms (9) based in Vientiane on 15 December 2011.Five audit firms submitted their quotations (US$1,400 - US$5,000) and local firm ASBC wasselected to conduct the audit because they submitted the most competitive offer. Relevantsections of the auditor’s report and the financial statements are attached to this annualreport (see ‘X. Financial Report’ for more details).XI.Financial ReportThe financial statement of MFWG were audited in February 2012 and please see theindependent auditor’s report below for more detailed information on the financial situationof the MFWG:Annual Report 2011 Page 40

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XII.Conclusions & OutlookThe MFWG made good progress in 2011 and has been able to establish its position as anemerging microfinance network in Lao PDR. It has seen increasing membership and activemember participation and was able to establish fruitful working relationships with its localpractitioners, donors, international organizations, Government authorities and serviceproviders. The network has contributed considerably to improving sector transparency thisyear. Overall, it implemented the majority of activities as planned for 2011 and managed toeven engage in other activities which had not been included in the workplan (establishmentof strategic and business plan 2012-2014, etc.).Major challenges faced by the young network are the fact that the MFWG has very limitedhuman resources to further expand its services to its members and in order to achieve itsgoals set for 2012, it is important that the network is able to increase its staff. The lack of aGeneral Director is perceived a major constraint in the development of the network atpresent as the workload and activities in 2011 outpaced the staff capacity. It is thereforeconsidered crucial to secure funding for this position to enable the network to sustainablyrun and expand its operations.In 2012 the MFWG’s strategic focus will be to finalize the already started process offormalizing the network as an association to enable it to fully establish its credibility,products and services. It aims at obtaining a temporary license as microfinance associationby year end latest. Moreover, 2012 will be an important year for the sector as theMicrofinance Decree will be finally promulgated and the new guidelines/regulations drafted.It is vital for MFWG to actively engage in the drafting process and to provide feedback topolicy makers to assure that the future regulations are conducive for sector development.The microfinance sector will also be exposed to foreign direct investment and the MFWGhas a role to play in preparing MFIs for accessing loan and/or debt capital from social foreigninvestors, etc.Building on the successful implementation of training activities in 2011 the MFWG will alsocontinue to provide more needed training in 2012 for MFI staff and Boards. Last but notleast, the network will further pursue its mandate to raise transparency by introducingperformance monitoring and benchmarks for Lao MFIs and by creating a semi-annualnewsletter with relevant sector information. MFIs need to focus on improving their socialperformance to avoid mission drift and multiple borrowing of clients. Outreach to the poorneeds to be further enhanced by creating appropriate products for poor clients living inrural areas. The MFWG will support this by organizing a market research & productdevelopment training and also by conducting social audits for MFIs.Please find below a brief summary of main activities planned for 2012. Also refer to theworkplan 2012 (see annex 1) for more details:1. Knowledge Management/Research & Representation• Collect performance data (2011) from member MFIs and upload on MFWG websiteand subsequently on MIX market, establishment of a benchmark system for peergroups, establishment of an ‘Award for Best Performing MFI 2012’Annual Report 2011 Page 47

• Participation in Banking with the Poor Workshop (‘Capacity Building for Partnershipsin Microfinance’ and ‘Invest in Mekong Region Marketplace’) in SiamReap/Cambodia• Participation in Social Performance Task Force Annual Meeting in Jordan• Participation in Asian Network Summit in Shanghai/China• Participation in SBFIC Regional Project Conference in Vietnam• Regular updates of MFWG website (Lao/English)• Establishment of a donor roundtable to improve donor harmonization and act asMFWG Advisory Committee2. Capacity Building & Training• Deliver at least four trainings for MFIs (e.g. Board Governance, Market Research &Product Development, Internal Control, Financial Analysis)• Conduct annual training needs analysis• Conduct at least one internship with reputed host MFI (subject to pending funding)• Participate in CERISE SPI Tool Certification training in Bangkok (Social Auditing) –conduct two social audits with Lao MFIs post-training –Network Certification3. Advocacy• Establishment of a Policy Task Force to jointly address policy issues• Continue discussion and follow up with BOL regarding policy issues affecting themicrofinance sector• Provide feedback on draft microfinance guidelines• Development of a code of conduct for MFIs4. Organizational Development• Hire technical staff (General Director) to support MFWG activities (subject topending funding)• Prepare and conduct regular member meetings (including General Assembly) andBoard meetings with focus topics (i.e. MFI refinancing, etc.)• Obtain at least a temporary license by Ministry of Home Affairs (regular follow up onprogress regarding formalization as an association)• Introduce member fees in line with approved membership fee structure and activelyincrease membership• BoD and management team visit of SBFIC and Banking Academy Germany (2participants, 1 week)In order to achieve its objectives and implement its activities, the network will requirefunding in the amount of US$ 80,551 for 2012 (see annex 2 ‘Budget 2012’ for more details).The network will be able to cover min. 11% (US$8,493) of its foreseen budget through selfgeneratedincome while the remaining amount (US$72,058) is thought to be covered byinternational agencies/donors.XIII. AnnexesAnnex 1: MFWG Workplan 2012Annex 2: MFWG Budget 2012Annex 3: MFWG Members’ ListAnnual Report 2011 Page 48

Annex 1: MFWG Workplan 2012MFWG WORKPLAN 2012: 2012ORGANIZATIONAL DEVELOPMENTI. (Goal 4)Indicators 2012 Responsible Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec1 FINANCIAL VIABILITY 1 2 3 4 5 6 7 8 9 10 11 12Prepare and submit funding proposals Number of approved TA1a to selected donorsproposals/signed MoUsDevelop and regularly revise fundingplan/costs as per revenue streamFunding plan in place, increasein revenuesBoD, MgtTeam1bincluding services that members haveto pay for (member fees, trainings,publications, etc.) to generateadditional income1c Introduce annual member fees Income from member fees OMActively increase membership byadvocating importance of being amember/distributingbrochure/publicly announcing MFWG1d services/activities, etc.2 GOVERNANCE & OPERATIONS2a2bPrepare and submit relevantformalization/association registrationdocs to PACSA, conduct regular followup on progressWrite monthly/quarterly/annualprogress reports (translate into Lao,English, German as appropriate)Increase in membershipnumbersMFWG has temporary licenseby Dec 2012Annual/quarterly/monthlyreports in place and submittedto BOD, BOL, donors, (PACSA)Mgt Team,BoDChair, Mobil.Comm., OMMgt Team2cEstablish sound accounting andinternal control system, establishhandbook/manual, review and adjustregularlyInternal control policies/handbook/manual in place TA, BoDAnnual Report 2011 Page 49

2d Conduct an external audit (2011) Annual Audit reports2e2f2g2hApprove and regularly review strategicplan with BOD and Executive Officeand adjust plan if neededConduct regular Board & membermeetings to discuss progress andfuture planningConduct General Assembly tonominate & elect Board, reviewprogress and approve futurestrategy/plans, by-laws, etc.Conduct network capacity/memberassessment using SEEP tool3 EXTERNAL RELATIONS3a44a4bRegularly update and print MFWGbrochure to raise awareness aboutMFWG activities and services amongrelevant stakeholders in Laos andabroadHUMAN RESOURCESOrganize and conduct BoD/staff studytour to SBFIC, Savings Bank Essen &Banking Academy, Germany (exactdate to be confirmed)Staff internship with reputed Lao MFIReview meetings held (min. 1pa)Min. 4 BOD & 4 membermeetings paAnnual General Assembly held& reportSEEP Association Surveycompleted (number ofmembers who submitfeedback)Bi-lingual brochure printedand disseminated tointerested parties duringevents/workshops in Laos andabroad, increase inmembership numbers2 participants attended studytour in Germany (one week)One staff participated in MFIinternship (1 week)ExternalAuditorBoD, MgtTeamBoD, MgtTeamBoD, MgtTeamMgt Team,membersOMSBFICGermany,Mgt Team,BoDOMAnnual Report 2011 Page 50

4cEstablish job description for LocalAdvisor/Trainer, secure funding,advertise, recruitcontract/s signed (2012)BoD, MgtTeam4d Conduct Annual BOD self-evaluation Annual assessment conducted BoD4e Conduct performance assessment of Staff performanceTA/Chairstaffassessments conductedannuallyII.KNOWLEDGE MGT/RESEARCH &REPR. (Goal 1)1a1b1c1d1e1f1g1hAttend BWTP 'Partnerships in MF' and'Invest in Mekong Region MarketPlace' Workshop in SiamReap/CambodiaAttend SPTF Annual Conference inJordanAttend ANS in Shanghai/ChinaAttend SBFIC Regional Conference inVietnamAttend SEEP Annual Conference inUSASeek or renew membership in relevantnetworks (SEEP, BWTP, SPTF, etc.)Create & disseminatenewsletter/bulletin with relevant MFsector articlesEstablish a donor (advisory)committee (roundtable) which meetsregularly with the objective toimprove donor harmonization,coordination, cooperation of MFprograms and projectsat least one member ofMFWG participatedat least one BoD or Mgt teammember participatedat least one BoD or Mgt teammember participated2 participants from BOD andMgt team participatedMgt Teamand BoDMgt Teamand BoDMgt Teamand BoDMgt Teamand BoD1 participant from MFWG BoD and MgtTeamProof of paid annualOMmembership feeAt least onenewsletter/bulletin issued peryear2 donor (advisory) meetingsheld, meeting minutesMgt Team(Intern)Mgt Team,Donor(Advisory)Comm.Annual Report 2011 Page 51

1i1j1k1l1mActive participation in/co-organizationof Annual MF Stakeholder Forumtogether with BOL (content/agenda,sector presentation, transparencyawards, etc.) - provided MFWG hastemporary licenseTrain staff in updating bi-lingualwebsite (Lao & English), updateregularly with sector relevantdata/add new pagesEstablish systems to collect MFIperformance data, collect data andadd to system and disseminateinformation on MFWG websiteProvide support to MFIs to liaise withand report consolidated performancedata to the MIX MarketEstablishment and ongoingrefinement of a benchmarking systemfor Lao MFIsEstablish criteria for a 'PerformanceAward' for best performing MFI as an1n incentive and distribute publiclyIII. ADVOCACY (Goal 2)Create a Policy Task Committee tolead policy issues that the network1a seeks to addressConduct regular member/stakeholdermeetings to discuss policyenvironment (MFguidelines/regulations, etc.) &issues/constraints affecting the sector,regular follow-up on progress withrelated Government Bodies/BOL1bParticipation in Annual MFStakeholder Conference,Workshop reportWebsite is fully functional andregularly updated (Lao &English)At least 10 MFIs submitperformance data annually/biannuallyBoD, MgtTeamIT Firm, MgtTeamMgt TeamAt least 5 of Lao MFIs reportregularly to MIX Mgt TeamBenchmarking systemestablished and updated TA, Mgt TeamAnnual Award handed out toselected MFIToR of Policy Task Committeeestablished, number ofmeetings held(Number of) workshop(s) heldwith MFWG members &stakeholders, (number of)statements submitted to BoLand related GovernmentBodies/BOL, number offollow-up meetings, numberBoD, MgtTeamPolicy Comm.PolicyComm.,Mgt TeamAnnual Report 2011 Page 52

of issues solvedDevelopment of Code of Conduct formember MFIs1cIV. CAPACITY BUILDING(Goal 3)Conduct annual training needs surveyas basis of training provision strategy;Questionnaire to be revised/updated1a and sent out to all stakeholdersBrokerage of training demand andsupply (e.g. on board governance,product development, internalcontrol, financial analysis)1b1c1d1eBrokerage of internships/exposurevisits (establish list of possibleinternship or exposure visit hosts,develop ToRs, fee structure, facilitateinternship/ exposure visit system,contact/liaise with interns) - (noconfirmed funding yet)Participate in CERISE SPI Tool trainingon social auditingPrepare and conduct 2 social auditspost CERISE SPI tool trainingCode of conduct establishedand approvedNumber of participatingstakeholders who submitquestionnaire, training needsanalysis report4 trainings conducted withmin 60 trainees, trainingevaluations/reports arepositiveOne internship /exposure visitconducted with Lao host MFI2 trainees participated intraining and certified to usetool2 MFI social audits conducted, final reports submitted toCERISE/MIXMgt Team,BOD withmembersMgt TeamHRD Comm.,Mgt TeamHRD Comm.,Mgt TeamOM, MFCOM, MFC,(TA)GovernanceProductDevelopmentInternalControl/AudiFinancialAnalysisAnnual Report 2011 Page 53

1f1h1i1jSupport concept and curriculumdevelopment of certificate course forMF practitioners in close cooperationwith donors/existing training institutesand BOL & BI (no confirmed fundingyet)Collect training materials, handbooks,technical literature related tomicrofinance training and add tovirtual and office reference librarySend out information on relevantmicrofinance training courses in Laos,abroad (short time, long-distance,etc.)Regularly update database onmicrofinance service providersresourcepersons/trainers/consultants;regularly update list, share withinterested parties and add to websiteCurriculum for MF certificatecourse is developed withactive support of local trainingprovidersNumber of trainingmaterials/literature onwebsite or on display in officereference libraryEmails sent to MFWG roster OMRegularly updated databaseavailable on website and inMFWG officeExternalConsultant,TA, MgtTeam,TrainingProvidersMgt TeamOMAnnual Report 2011 Page 54

Annex 2: MFWG Budget 2012 (Costs are indicative, for planning purposes only)Ref Activity Remarks 2012 2011I. ORGANIZATION DEVELOPMENT (Goal 4)A Office Operating Cost1 Office Rent $250/month $ 3,000 $ 2,250.002 Office Maintenance office equipment, licenses/anti-virus programs $ 400 $ 353.603 Office Equipment various $ - $ 6,877.964 Electricity approx. $67/month $ 500 $ 388.715 Telephone / Internet / Communications/ Mail $ 200 $ 98.866 Supplies / Stationary / Printing / Photocopies approx. $250/month $ 3,000 $ 2,580.067 Transport local and/or international travel/car hire $ 500 $ 223.008 Annual External Audit January - December 2011 $ 2,200 $ -9 Office Manager (Admin/Finance) $ 7,800 $ 7,796.0010 Contingency unforeseen expenses, miscellaneous $ 950 $ 730.88I. SUB-TOTAL Organization Development 23% $ 18,550 $ 21,299.07II. CAPACITY BUILDING (Goal 3)1 National Technical Advisor/Trainer/Translator $ 16,800 $ -2 Board Governance Training $ 1,520 $ -3 Market Research & Product Development Training $ 7,048 $ -4 Internal Control Training $ 4,000 $ -5 Financial Analysis Training based on ADA training in Hanoi $ 4,000 $ -6 CERISE SPI Tool training social auditing $ 1,500 $ -8 Exposure visit to Savings Bank/Banking Academy Germany (2 participants, 1 week) $ 4,000 $ -9 Internship/Exposure Visits to host MFI in Laos for Lao MFIs $ 2,000 $ -II. SUB-TOTAL Capacity Building 51% $ 40,868 $ 24,840.10IV KNOWLEDGE MGT/RESEARCH & REPRESENTATION (Goal 1)1 Membership Fees SEEP, BWTP, others $ 400 $ 309.802 MFWG Meetings (food/snacks/venue) BOD, Task Com., Members incl. travel allow. $ 2,000 $ 1,865.493 Translations (external translator) lump sum for written translations $ 5,000 $ 4,061.234 Capacity Building WS for Partnerships in MF BWTP Workshop (Invest in Mekong Region) $ 844 $ -Annual Report 2011 Page 55

5 BWTP MF Summit/ANS in Shanghai/China 2 scholarships $ 1,200 $ 4,040.006 SEEP Annual WS in Washington1 participant $ 4,500 $ 4,630.007 SBFIC Regional Network Meeting in Vietnam 2 participants $ 1,500 $ 1,122.538 SPTF Working Group Annual Meeting 1 participant $ 2,000 $ 1,970.009 Workshops on industry related topics $ 690.0010 Performance monitoring of MFIs data consolidation/MIX $ - $ -11 Purchase of library MF reference books $ 326 $ -12a Website Development Training of staff to update website/add pages $ 1,363 $ 307.4512b Website Support/Maintenance including design of new pages $ 500 $ -13 Printing of bulletin $ 500 $ -14 Award for Best Performing MFIs criteria, preparation, award hand-over $ 1,000 $ -III. SUB-TOTAL Knowl. Mgt/Research & Repres. 26% $ 21,133 $ 18,996.50TOTAL All Activities (I.-IV) $ 80,551 $ 65,135.67Annual Report 2011 Page 56

Annex: 3 MFWG Member List (Status: February 2012)No Organization Contact Person/Position Position Address Telephone & Fax E-Mail/WebsiteMicrofinance PractitionersDeposit-Taking Microfinance Institutions (DTMFIs)DTMFI Development (DMID) Somchit Bounluem Director Song Puon village, 13 North Road, Tel/Fax: 021-650 0871somchit_dmi@hotmail.comNaxaythong District, Vientiane23Ekphathana Deposit-TakingMFISaynhai Samphanh Deposit-Taking MFISomphone SisenglathChantha MingbouphaSaysamoneKouanmeuangchanhDirectorDeputy DirectorDirector4 Newton Deposit-Taking MFI Linda Souvannaheuang ManagerPhatukham Deposit-Taking5Khanmany SayyathithMFINon Deposit-Taking Microfinance Institutions (NDTMFIs)Hom Non Deposit-Taking6Bounteng KeochanlaMFIs78910Phongsaly Non Deposit-Taking MFI for DevelopmentManagerHaysok Village, Chanthabouli District,Vientiane Capital183 LattanalangsyTai Village,Sysavangvong Road, KaysonePhomvihan District, Savannakhet146/16 Souphanouvong Avenue,Vientiane CapitalWatchanh Tha Village, ChanthaboulyDistrict, Vientiane CapitalManagerKhonvat Village, Hom Dist, VientianeProvince, P.O.Box 713Souvantha Daevanh Director Homsavang Village, Bounnua Road,Phongsaly District, PhongsalyProvinceOudomxay Development307, unit 21, Nalao Village, XaySomchit Douangmixay ManagerNon-Deposit Taking MFIDistrict, P.O.Box 072, OudomxaySaSomSab Non-DepositTaking MFI Chanpheng Lilavong Manager Ban Nakouy, Saysettha Dist, VientianeSouay Kan Phatthana Non-Deposit TakingMFISoukvilay Thongsavath Manager Phanxay Village, Fathi Road, XamneuaDistrict, HuaphanTel/Fax: 021 244428;24 43 95; 021 244 395Tel/Fax: 041 214596Tel: 021 223 447Fax: 021 217 771Tel/Fax: 021 254 100Tel/Fax: 023 281 020Mobile: 020 5541 0916Tel/Fax: 088-210 234Tel: 081-211 025Fax: 081 312 368Office: 030 9812 050Mobile: 020 5601 0506,5555 5639Tel/Fax: 030 5160 961,064 312 080somphone.s@mfclao.comchantha.bp@mfclao.comsaysamone_ssdtmfi@yahoo.cominfo-newton@excite.comkhanmany@gmail.comcdtclaos@yahoo.comdeovanhtha@yahoo.commicrofinanceodx@yahoo.comchanpheng.lilavong@gmail.com /sana1000time@hotmail.comsoukvilay1@hotmail.com1112Women and FamilyDevelopment Fund Non-Deposit Taking MFIXayniyom Non-DepositTaking MFIKhonevilay SengsourinhaKhanthaly SenvilayvongDirectorManagerBan Phonethan Nua, SaysethaDistrict, VientianeNongmengda Village, Xay District,Oudomxay ProvinceTel/Fax: 021 265 564Tel/Fax: 081 211 853pick_s178@yahoo.com=khanthalyrfs@yahoo.com.sgAnnual Report 2011 Page 57

Khomvangmai Non-Deposit13Taking MFISavings & Credit Unions (SCUs)SisongkhalmSithanomhackManagerBonangual Village, Chanthabouly Dist,Vientiane14 Fonds CooperatifSouliphonesithGeneral Nelamid Road; Ban ThongkhankhamRattanamongkhoun Manager Tai, P.O.Box 7437, Vientiane CapitalSCU Houamchay Phatthana BoudsadyManager Unit 5, Dongdamdoan Village,15KhammanivongKaysone Phomvihan District,Savannaketh ProvinceSCU Huasae Chaleun Saiya Thammavongseng Manager No 129, 13 South Road, Huasae16Village, Bachieng District, ChampasackProvince17 SCU PaksongVon Chanthalavong Manager Paksong Village, Songkhone District,Savannakhet ProvinceTou Mani Manager No 201, Xayyamongkhoun Village,18 SCU SenoRoad No 9, Outhomphone District,Savannakhet ProvincePhouvong Xayyasith Manager No 094, Chao A Nouk Road, Thakhek19 SCU ThakhekKang Village, Thakhek District,Khammuane Province20 SCU VanmaiKhammany Manager Laungam Village, Laungam District,Salavan Province21 SCU Vientiane Sithon Siriphong ManagerBan Namlin, Phonhong district,Vientiane ProvinceNetwork Support Organizations (NSOs)Chaikham Lorbandith Manager Phonexay Village, Hongsa District,22 CCSA HongsaSayyabouli ProvinceVillage Development Fund Amphong Sitkeomek Manager Muangkeo Village, Huayxay District,23Association BokeoBokeo ProvinceBi-/Multi-lateral Agencies/Donors/INGOs24Asian Development Bank(ADB)Phantouleth LouangrajEconomicsOfficerCorner of Lane Xang Avenue andSamsenthai Road, P.O.Box 9724,VientianeTel/Fax: 021 540 145Tel: 021 263 462Fax: 021 261 825Tel/Fax: 041 252 153Tel/Fax: 031 900 173Tel/Fax: 041 530 355Tel/Fax: 041 431 430Tel/Fax: 051 251 190Tel/Fax: 034 300 226Tel: 023 212073020 56524073Fax: 023 212073Tel/Fax: 074-860 002Tel/Fax: 084-212 122Tel: 021 250 444;Fax: 021 250 333Info.kvmmfi@gmail.comfcsith@etllao.comboudsady_scusavan@hotmail.comsaiyakai@hotmail.comscupaksong@hotmail.comscuseno@hotmail.comscuthakhek@hotmail.comvanmaiscu@gmail.comscuvte@gmail.comchaykham@yahoo.comlorbanlith@yahoo.comamphong.vdf@gmail.complouangraj@adb.orgwww.adb.org/LaoPDRAnnual Report 2011 Page 58

25German Cooperative andRaiffeisen Confederation(DGRV)Hildegard von WaltherRegionalDirectorH 132, U 11, Ban Sibounheuang,Chanthabouly District, VientianeTel: 021 261 895Fax: 021 261 896von.Walther-DGRV.Laos@gmx.netwww.dgrvsa.co.za26German InternationalCooperation (GIZ-Access toFinance for the Poor Project)Klaus ProchaskaTeam LeaderYonnet Road, Chanthabouly District,P.O Box 563, VientianeTel: 021 217 880Fax: 021 212 487klaus.prochaska@giz.dewww.gtz.de/en/27International LaborOrganization (ILO-WEDGE)Phetphim ChampasithNational ProjectCoordinatorSMEPDO Office, Ban Fai, VientianeTell/Fax: 021 450 318ilowedge@laotel.comwww.ilo.org28International FinanceCooperation (IFC-Access toFinance Project)Viengxay PraphasiriProject OfficerAccess toFinance90 Phonexay Road, PO Box 9690,VientianeTel: 021 450 017-9Fax: 021 450 020vpraphasiri@ifc.orgwww.ifc.org29Savings Bank Foundation forInternational Cooperation(SBFIC)Bernd WerthenbachProjectDirector,CountryRepresentativeBan Phonthan, Vientiane Tel: 021 265 564bwerthenbach@yahoo.comwww.sbfic.de3031World EducationConsortium (WEC)Sustainable Forestry andRural Development Project(SUFORD)Microfinance Training Service Provider32Microfinance Training Center(MFC)Bouasone KeoounkhamTeo Dang DoSomphone SisenglathProjectCoordinatorInternationalLivelihoodDevelopmentAdvisorManagingDirectorP.O.Box 6782, VientianeTel: 021 214 524Fax: 021 217553bouasonekeo@hotmail.commicrofinance@wec.laopdr.comDontiew Village, NAFES, Vientiane Mobile: 020 5552 6881 teododang@gmail.comSaphanthong Neua Village, SisattanakDistrict, PO Box 8695, Vientiane Tel: 021 262 916Fax: 021 26 29 16somphone.s@mfclao.comwww.mfclao.comAnnual Report 2011 Page 59

TACDO Microfinance33Khamphat BoulomManagement Training CenterMicrofinance Consultants / Resource Persons34 Sebastian Behrle35 Vanhsy ChindavongDirectorRural &MicrofinanceConsultantConsultant inRural andMicrofinance,Rural andRegionalDevelopmentPlanningPO Box 7382, Phaxay Village,Sisattanak District, VientianeBan Gaeng Nyang, HadxaifongDistrict, P.O.Box 3077, VientianeHouse# 144 Unit 16, Ban Nathom,Xaythani dist. VientianeTel: 021 285139/40Fax: 021 353 961Tel/Fax: 021 360 671Mob:-020-2222 2687tacdocenter@yahoo.comwww.tacdocenter.comsebastianbehrle@gmx.netvanhsyc@yahoo.com36 Timo HogenhoutMicrofinanceConsultantNo. 125-2 Wat Chan Village, P.O. Box3197, VientianeMob: 021 413 290;Fax: 020 784 5133timo@zzphogenhout.nl37Prof. Dr. Hans DieterSeibelUniversity ofCologneHahnwaldweg 14, 50996 Cologne(Germany)Tel: +49 2236 929878Fax: +49 2236 929877seibel@uni-koeln.deAnnual Report 2011 Page 60