The Small and Medium-sized Enterprise (SMEs) Promotion Department has signed agreements to allocate US$16 million to five commercial banks to provide loans to promote SMEs.

The ceremony for signing the agreements between the department, which is under the Ministry of Industry and Commerce, and various commercial banks was held in Vientiane on Wednesday. The signing of the pacts was witnessed by the Minister of Industry and Commerce, Dr Khampheng Saysompheng, and senior officials from line ministries and banks.
The department has assigned five commercial banks to disburse funds as financial support from the Lao PDR Micro, Small and Medium Enterprise Access to Finance Emergency Support and Recovery Project (MSME A2F-ESR Project).
A total of US$16 million will be distributed to the five banks to offer loans to MSMEs amid the Covid-19 pandemic, which has impacted economic activities. The five banks chosen to disburse funds allocated by the MSME A2F-ESR Project include VietinBank, Sacombank Lao, LaoVietBank, Maruhan Japan Bank Laos and Laos China Bank Co Ltd.

The government will also contribute 94 billion kip to be allocated to four commercial banks Lao Development Bank, Sacombank Laos, LaoVietBank and Maruhan Japan Bank Laos.

In addition, the government will allocate another 5 billion kip to the Xaysomboun Development Fund to provide loans to residents of Xaysomboun province with a low interest rate of 3 percent per year.
In his opening remarks, the Country Manager for the World Bank in Laos, Mr Alexander Kremer, said the pandemic has precipitated a growth slowdown around the world. “MSMEs are especially vulnerable to these economic disruptions. MSMEs play an important role in the Lao economy and are critically important for the livelihoods of the Lao people, accounting for around 99 percent of registered firms, and, according to the 2013 economic census conducted by the Lao Statistics Bureau, 82 percent of total employment,” he said.
He said the MSME A2F-ESR Project was prepared during the pandemic as a follow-on project after the successful implementation of the SME Access to Finance Project (SME A2F).

“It aims to help small businesses withstand the impact, and recover from the crisis by facilitating access to finance, which has been identified as one of the top three prominent obstacles facing MSMEs according to the 2018 Enterprise Survey,” he said.

The project will enhance access to finance for MSMEs in the context of the Covid-19 emergency and boost recovery through a combination of Line of Credits (LOCs) to MSMEs, technical assistance to strengthen the capacity of financial institutions to lend to MSMEs, and technical assistance to increase capacity of MSMEs.

The project will also support government efforts to establish a Partial Credit Guarantee (PCG) facility to backstop bank lending to MSMEs.

“Finally, the project will support MOIC’s leading role in developing and implementing policies to support Lao MSMEs,” he added. In his remarks, Dr Khampheng thanked the World Bank for the financial support provided through the MSME A2F-ESR Project.
“As we all know, MSMEs cover over 99.8 percent of all enterprises in Laos and the government plays critical role to promote this sector and to ensure that funds for MSME and SME promotion are effectively implemented, as this is already included in the national agenda,” he said.
Representatives of commercial banks advised borrowers that access to finance for SMEs will not be a big issue if they comply with loan conditions set by banks.