Lao SMEs need more financial support
Lao SMEs need more financial support
Laos still needs more funding to promote the growth of small and medium d enterprises (SMEs) through added financial and technical support, according to SME Promotion and Development Fund Director Mr Somdy Inmixai.
“According to the government's initial SME development plan for 2011 to 2015, the sector needs financial support of about 3,700 billion kip to push the SME sector growth to about 13 percent per year,” Mr Somdy said at the SME Promotion and Development Fund opening ceremony last week in Vientiane.
“The money will include about 3,200 billion kip for the SMEs financial support. The rest will be for technical support or promotional activities,” said Mr Somdy, who is also the SME Promotion and Development Office Director General.
He said the government's approval to create an SME Fund will generate money from many sources and contribute to the sector's project promotions, development, operations and growth.
Based on a World Bank study, the inability of SMEs to access funds is still a major issue that limits the formation of new businesses and prevents others from expanding and growing.
Even though many new commercial banks have opened, their financial support of the SME sector is no different to other business clients. The money that the banks release in loans to business is mainly from the short term deposits of its clients.
“So they mainly release the loans to the mega companies, or projects that have stable or steady finance and can make good income for the banks,” he said. “Their loans are mainly for construction projects and the government's infrastructure development projects.”
His comments come despite the opening of the SME Fund at a ceremony last week, which provides the sector with the opportunity to ask for funds or capital for their business operations and promotion projects.
In the budget for the 2010-2011 fiscal year, the government approved 16 billion kip of funding for the SME Fund establishment, which is a government organisation under the Ministry of Industry and Commerce.
However, the Fund will not release the funds or loans to SMEs directly. It will release the funds to SMEs through the Lao Development Bank as a loan and the SME can then acce ss loans without assets.
The Fund provides 14 billion kip to the bank for five years at an interest rate of 5 percent per year. The two parties signed an agreement at the same ceremony last week.
The rest of the money will go towards SME promotion and development projects and Fund management.
vientiane times
