Savings groups/credit unions serve as a financial intermediary within a village by mobilizing savings from rural households and extending loans to them. This system often encounters an issue of excess funds when total savings exceed loan demands within a credit union. In Thailand rural financial markets created by savings groups are segregated not only from those created by other savings groups but also from formal financial markets. Excess funds become a critical issue for some savings groups and hinder their development. On the other hand, in Japan, the market inte-gration with respect to excess funds was pursued by organizing segregated rural credit markets (horizontal integration) and aligning rural credit markets with formal financial markets (vertical integration). This paper discusses the contrasting evo-lutionary paths of Japanese credit unions and Thai savings groups to offer practical insights for Lao savings group movement.

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The shifting cultivation stabilization policy after the mid-1990s in northern Laos had a fundamental impact on rural lives, including an accelerated migration of non-Lao ethnic people. Based on household-level detailed data collected in 2010.11 from eight villages in Luang Prabang Province, we analyze first the differential impacts of such a policy on different types of villages in terms of location (access to urban centers), land endowments, ethnic composition, etc. Then we examine the role and limitations of village-level savings groups (SGs) introduced by an NGO (supported by the Lao Women's Union) from the middle of the first decade of the twenty-first century. It is found that most of the SGs faced difficulties in accumulating savings, which resulted in a shortage of funds that could be credited to needy members. Money borrowed from SGs is used mainly for medical treatment and consumption. It is suggested that income stabilization and diversification is one of the key factors that facilitate villagers' participation in SGs.

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Rural households in developing countries face difficulty in no small part in managing emergent expenditures on various events. It is commonly observed that rural households put up money for each other and swap small amounts of rice or other food stuffs with neighbors to cope with idiosyncratic shocks. This network finance plays an important role in supporting rural households facing an emergency with little or no administrative cost, especially in the society where formal safety-net mechanisms are de facto absent. As network finance is likely to function within a narrow range of blood and geographical proximity, the households tend to form a network in similar economic circumstances. Then, it can be assumed that the effectiveness of network finance will be vulnerable for the poor households whose network members belong to a similar stratum. This paper examines the accessi-bility of the poor to network finance, using household data collected in the hinter-lands of Luang Prabang, Laos. We found that the poor can resort feebly to network finance. Therefore, the role of savings groups to mitigate shocks is more important for the poorer households.

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Based on original household survey on the six villages in Vientiane vicinity in 2005, the paper investigates the impact of Savings Groups (SGs) programs on household income, expenditure, and asset, applying the methodology of Coleman's (1999) study on Thailand to address placement bias and endogeneity problem. The results revealed that SGs programs brought certain changes; SGs boosted educational expenditures implying activation of human capital formation, increased the house asset suggesting villagers' investment reflected by possible business activation, and brought a possible shift in income sources from traditional agriculture to livestock raising. The paper interprets these different results from Coleman (ibid.) in two pos-sible ways; First the Laotian case is to an extent, free from a bias associated with seed capital allocation, therefore is more suitable to capture the effect than Thailand, and second it is since the stage of financial accessibility in Laos is far less developed than in Thailand.

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Since the late 1990s the savings groups have been introduced in the villages of Laos. This movement has offered new borrowing opportunities for the rural people. Based on household survey using a structured questionnaire in four study villages (N=684) in Vientiane Municipality during 2007.08 we analyzed the role and performance of the savings group in rural financial markets, especially focusing on who borrows, from which sources, and for what purposes by comparing the savings group with informal and formal lenders. Two major findings are as follows. First, three types of lenders (savings groups, formal and informal lenders) have their own particular features, and thereby loan purposes differ significantly. Formal banks offer loans exclusively for production purposes, while informal lenders do for coping with emer-gencies. Savings groups fall between them. Second, though poor households are reluctant to be a savings group member, once they participate in they actively obtain loans from it. In contrast, though rich households actively participate in the group, they obtain loans less from it. Group members claim that the primary purpose of joining the savings group is to cope with emergencies. When the members obtain loans from the savings group, however, nearly 40% of the loans are used for produc-tion purposes, mainly in agriculture. There exists a change between saving pur-poses and borrowing ones. It is assumed that in villages with the higher loan credit for production purposes, the savings groups show favorable performance, and thus a rapid growth.

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There is a tendency that the success of some of the village-level savings groups in Laos inevitably causes an excess funds problem, because the activity of a saving group is confined to a small village territory. Given the lack of efficient and reason-able system for coordinating between funds-surplus and funds-deficit savings groups, the excess funds problem of funds-surplus savings groups leads to a stagnation of such groups, whereas other funds-deficit groups continue to suffer from the fund shortage. The paper, based on a case study of a village in Vientiane Municipality since 2003 until 2012, analyzes how various stakeholders responded to such an excess funds problem with an apparent failure in the study village and alerts the policy-makers in Laos to make necessary measures, since the excess funds problem is also providing a good opportunity to establish a broader and integrated institu-tional financial system in rural Laos.

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