Micro-finance is an emerging important financial sub-sector in Asian transition countries. Its role is to improve financial access of the poor and small economic players and thus help them to build assets, thereby contribute to poverty alleviation. This paper provides an overview of rural finance and micro-finance development in transition countries in South-East and East Asia - Cambodia, Lao PDR, Myanmar, Vietnam, and Mongolia- focusing on the institutional evolution and the inter-relation between policies and institutions. We find diverse potentials that formal and semi-formal financial institution-agricultural banks, micro-finance banks, micro-finance NGOs, financial co-operatives and other indigenous financial systems-have to reach out to the rural poor of respective nations. Any monolithic view that expects a single type of micro-finance institutions to dominate the rural financial markets is to be denied. To develop effective rural financial systems, some policy implications are drawn, such as reforms of agricultural banks, adoption of market-based policy framework, development of retail capacities of micro-finance institutions, progressive establishment of legal and regulatory framework for micro-finance, improvement in governance of indigenous financial systems, and the importance of savings mobilization.
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