Small businesses need long-term loans to grow

Small businesses need long-term loans to grow

Small and Medium-Sized Enterprises (SMEs) are still struggling to prepare for the arrival of the Asean Economic Community (AEC) in 2015 because of a lack of long-term financial support and promotion.

“Currently we still lack long-term financial support,” Finance Deputy Minister Mr Bounchom Oubonpaseut said at a conference on accessing finance that brought together banks and entrepreneurs last Friday in Vientiane.

Mr Bounchom said current financial support from commercial banks was only short or medium-term, often lasting one to three years.

He said that made it difficult for SMEs to grow and expand when they faced a problem or high production costs.

Many other countries in the region have given their SMEs long-term financial support over at least five years and sometimes more than seven or ten years.

“This has made their production costs lower and they will be able to compete with other Asean countries,” Mr Bounchom said.

The government is issuing policies that promote local production and make it easier for SMEs to access longer-term loans.

Laos' economy is growing fast but it still faces challenges preparing its domestic businesses for the arrival of the AEC.

“The main issue with the way we operate business now is how to get finance for SMEs. This issue is a difficulty when comparing Laos with other countries,” Mr Bounchom said.

In other countries SMEs get long-term financial support from private banks to help them grow.

But Mr Bounchom said in Laos commercial banks often have limited funds themselves and cannot afford to finance newly established SMEs.

He said the government should have money set aside to join with the commercial banks in supporting SMEs.

“However, the government also has limited funds,” he said.

The AEC will transform Asean into a region with a free flow of goods, services, investment, skilled labour and capital.

In the AEC Blueprint, the Asean member states agreed to reduce tariffs, improve frameworks for trade, better enforce compliance with standards and progressively open up national service sectors to cross-border supply and foreign investment.

vientiane times