Bank to issue more loans in bid to alleviate poverty

Bank to issue more loans in bid to alleviate poverty

State-owned Nayoby Bank plans to issue low interest loans worth 532 billion kip this year in support of the government's goal to raise the poorest people out of poverty.

Nayoby Bank Director General Mr Bualong Xayavong announced last week the bank would issue 432 billion kip in loans to the 45 poorest districts in the country, enabling people in remote areas to enhance agriculture and handicraft production and raise their standard of living.

The bank will also provide 100 billion kip for people in other areas, so they can afford to buy agricultural products from people in poor districts, Mr Bualong said.

Market access is a major problem for people living in deprived areas.

The interest rate on loans issued by the Nayoby Bank is lower than that charged by ordinary commercial banks. Interest is charged at 7 percent on a one year loan, 8 percent on two to three year loans, and 10 percent on loans of over three years.

Commercial banks typically set the interest rate at about 12 percent per year and it will be higher if the loan is very long term.

Mr Bualong said the government had advised the bank to issue loans to its priority development areas around the country. The objective is to give 74,176 families (38 percent of the total number of poor families in 1,733 of the 3,175 poorest villages) the means to buy the agricultural equipment and machinery they need to boost productivity.

Under the National Socio-Economic Development Plan for fiscal year 2011/2012, the government is targeting a reduction of overall poverty from 24 percent to 22 percent, and a drop in the number of poor families from 19 percent to 17 percent.

The government considers that a shortage of capital, agricultural equipment and modern production methods are holding back the development of people in poor areas of the country, and hence their ability to raise their standard of living.

But economists say loans should be accompanied with the transfer of technology, business acumen and market access for poor people, so that they don't become even poorer.

They say that one of the main reasons for poverty is their lack of education, explaining that a low level of education makes it difficult for people to run a successful business.

Mr Bualong said the bank will also try to collect 226.5 billion kip in loan repayments this year, as this would strengthen its financial position so that it can provide more funding next year.

Nayoby Bank plans to open branches in Attapeu, Huaphan and Phongsaly provinces and in Vientiane this year, hoping the expansion of services will give people in remote areas access to investment capital.

In 2011, the bank issued 674 billion kip in loans to people living in poor districts nationwide

vientiane times