Lao Development Bank to issue more loans to SMEs
Lao Development Bank to issue more loans to SMEs
The Lao Development Bank (LDB) has released loans of about 500 million kip to small and medium enterprises (SMEs) since a dedicated fund to encourage lending to such businesses was officially launched in August last year.
A bank official said on Friday that the loans are being granted mainly to people who raise pigs and poultry.
The bank is considering granting loans to people who have already submitted proposals to the bank requesting a line of credit. “These customers are trade services operators,” the bank official said.
Small and medium d enterprises can obtain loans from the government's SME Fund through Lao Development Bank service offices. The government's SME Fund provides 14 billion kip to the bank for five years at an interest rate of 5 percent per year, the official said.
The bank expects the number of businesses applying for loans from their service offices to steadily increase, aiming to allow SMEs around the country to have the same access to credit facilities.
It expects to release loans to about 70 businesses, drawing from the 14 billion kip fund, according to officials. The fund has mainly focused on supporting SMEs in the agricultural processing, handicraft and tourism sectors.
Small enterprises can receive loans of up to 250 million kip while medium d enterprises can obtain loans of up to 500 million kip.
The bank will release loans to SMEs at an interest rate of 9 percent per year for a loan of one year or less, and a rate of 10 percent per year for loans of between one and three years in duration.
The SME sector forms the basis of the national economy and the backbone of economic growth. It makes up 99.8 percent of all businesses, according to the Ministry of Industry and Commerce.
According to the government's initial SME development plan for 2011 to 2015, the sector needs about 3,700 billion kip in financial support to push growth in the sector to 13 percent per year.
This figure will include about 3,200 billion kip in financial backing for SMEs, while the remainder will be for technical support and promotional activities.
The government recently approved the provision of 16 billion kip to the specially dedicated fund, which is designed to encourage banks to loan money to SMEs, but as can be seen from the figure above much more will be required from the private sector.
Previously, it was difficult for smaller operations to access bank loans, thus hindering their growth. Gettin g bank managers to realise the business potential there is in offering loans to SMEs is a key aim of the government.
The government's SME Fund provides 14 billion kip to the bank, while the rest of the money will go towards SME promotion and developmen t projects as well as the management of the fund itself.
The Lao Development Bank is a state-owned commercial bank which opened in 2003 to provide funds to small and medium-d enterprises and encourage private sector development.
vientiane times
