Written by Mekong Institute  

The purpose of this study is to present the problems of Village Development Funds (VDFs) members in terms of borrowing money, repaying loans and saving deposit. It also examined the impact of VDFs on poverty in terms of income, expenditures, and savings by adopting the methods used by Coleman (1999). The survey was conducted on June 2012, with 15 villages at Sukuma district in rural area southern of Laos. All these villages have VDFs which were in operation for various lengths of time. The villagers were allowed to decide for themselves if they wanted to be members or not. The sample was conducted in 361 households which included 113 household members and 248 households non-members. The study found that the main problems of members for saving deposit in VDFs is that they have irregular income and the accounting system of VDFs was not clear. They also found it difficult to borrow money from VDFs because first, the loan size was very small and not enough for generating income or running a business; second, they do not have collateral for loan; and third, the steps to borrow money was very difficult. The main causes of difficulty in paying back loans are first, members in household were sick and there was lack of market demand for products of the household; second, they used enterprise capital on consumption; third, the loan activity was not profitable. To analyze the impact of VDFs on household income, expenditure and saving of members, this study shows that VDFs program does not have significant impact on household income, expenditures, and savings. There were also some problems with management of VDFs. Some of the borrowers took loans for non-productive purposes. Thus, in conclusion, the Village Development Funds program might not reduce poverty in Sukuma District, Champassak Province.