(ProQuest: ... denotes non-US-ASCII text omitted.)I IntroductionThe Village Savings and Credit Group (hereinafter, SG) in Laos is basically a closed, village-level financial group. Membership is confined to villagers, and savings mobilization and credit extension are limited to the members. Roughly 70% of profits from credit operations are distributed as dividends once a year to members in proportion to their savings amount. In general, at first, demand for credit exceeds savings and because external institutions generally provide no, or very little, seed funding, so an SG inevitably rations credit.1) Later, as the group develops and savings accumulate to a certain level, savings begin to exceed credit demand. Lowering the interest rate, which is a common adjustment measure, has an apparent inhibitory effect on the development of SGs as a reduced interest rate discourages savings mobilization, although a substantial savings surplus exists among village households. Such SGs suffer from an excess funds problem. We also note the existence of many SGs that suffer from shortage of funds in a prolonged period.To avoid such a scenario, SGs require a system to coordinate the gap between demand and supply among funds-surplus and funds-deficit SGs. When SGs as a whole have excess funds, the surplus money should be transferred to external financial markets. Through such a developmental process, SGs can be integrated into the broader financial system, thus contributing to the development of the nation-wide financial markets. The agricultural cooperatives in Japan, for instance, established the three-tier cooperative system-village-level, prefecture-level, and nation-level-to transfer excess funds from village-level cooperatives to a nation-level cooperative bank (see the first paper in this special issue by Ohno) and thereby supported the formation of the country's more efficient and integrated financial market.In Laos, some SGs, especially those in Vientiane Municipality, began facing an excess funds problem several years after establishment. The present study examines the responses of the various stakeholders-committee members and advisers of an SG, villagers, NGOs (Foundation for Integrated Agricultural and Environmental Management [FIAM] and Community Organizations Development Institute [CODI]),2) and the Lao Women's Union (LWU)-to this problem. This study's major objective is to investigate the excess funds problem, focusing on the aforementioned stakeholders' responses through a detailed case study of a village in Pakngum District, Vientiane Municipality. By analyzing the process of the development of SG, this study also identifies the SG's impact on the village financial market and economy.The paper proceeds as follows. In section 2, we describe the study village on the basis of a household survey of 75 sample households, followed by a discussion of the SG's development and impact on the village economy in section 3. Section 4 presents the process that caused the excess funds problem and the methods by which the SG committee and other stakeholders attempted to manage it. Section 5 presents the conclusions.II Profile of the Study VillageFIAM and CODI began organizing SGs in Vientiane Municipality (hereinafter, Vientiane) in 1997. By December 2003, a total of 217 SGs were formed in Laos, covering nine districts (muang) of which five were in Vientiane (Table 1). A total of 178 SGs existed in Vientiane, concentrating in the Xaythany District (92 villages out of 103) and Pakngum District (53 villages out of 53). Also notable was the amount of savings: as of December 2003, 217 groups had accumulated 5.89 billion kip (averaging 27.2 million kip per group),3) of which 145 groups (roughly two-thirds the groups) in Xaythany and Pakngum Districts had accumulated 4.99 billion kip (84.7%).The study village (ban), Don Neua, is one of the 53 villages in Pakngum District. Supported by CODI, an SG was established in September 2000. …