<Articles>Savings Groups and Rural Financial Markets: Japanese and Thai Experiences

Abstract

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 integration 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 evolutionary paths of Japanese credit unions and Thai savings groups to offer practical insights for Lao savings group movement.