Lao Development Bank issuing more loans to SME's
The Lao Development Bank (LDB) has released loans of about 7 to 8 billion 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 Tuesday that the loans are being granted mainly to people who raise pigs and poultry, trades and service operators and landlords who let out budget apartments and row rooms.
“Currently we are considering granting loans to a few more people who have already submitted proposals to the bank requesting a line of credit. These customers are traders,” a bank official said.
SMEs can obtain loans from the government's SME Fund through the Lao Development Bank.
The government's SME Fund provided 14 billion kip to the bank for five years at an interest rate of 5 percent per year, and “so far we have issued loans to the SMEs equivalent to about half of the fund,” the official said.
The bank had released loans totalling only about 500 million kip to the SMEs in January. It hopes the number of businesses applying for loans from their service offices will steadily increase, aiming to allow SMEs around the country to have the same access to credit facilities.
It expects to release loans to a total of about 70 businesses, drawing from the 14 billion kip fund. The fund has mainly focused on supporting SMEs in agricultural processing, and the handicrafts 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 annum 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. Getting 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 development projects as well as the management of the fund itself.
LDB is a state-owned commercial bank which opened in 2003 to provide funds to SMEs and encourage private sector development.