Lao banking sector continues to grow
Lao banking sector continues to grow
The number of commercial banks in Laos has seen a rapid increase over the past years thanks to the government policy to facilitate investment in the banking sector.
According to a report from the Bank Supervision Department at the Bank of the Lao PDR, the number of commercial banks in Laos has now reached 32, an increase of six banks compared to the end of 2011, thanks to the government policy to facilitate and support investment in the banking sector.
The government considers the banking sector as central to future growth, given its central role in mobilising the investment funds required to promote further economic expansion. The country also opened the Lao Securities Exchange in 2010, however, there are currently only two companies listed on the market.
Most of the banks in Laos are branches of foreign banks, state owned banks and joint venture banks, while there is also one policy bank, that being Nayoby bank. The total number of commercial bank branches in Laos has now reached 80 while the number of bank service units exceeds 290 and ATM machines now number 558.
The report shows that the combined total assets of the banks saw a 42 percent increase. One of the major outstanding achievements in the banking sector in 2012 was that foreign commercial banks in Laos were able to increase their registration funds in line with the requirements of the Bank of the Lao PDR.
The commercial banks played a significant role to help the country to mobilise investment to boost economic growth. In 2012, the commercial banks employed a number of means to attract Lao people to deposit money with their institutions, enabling them to fund a number of investment projects in Laos.
The amount of deposited funds with the commercial banks in 2012 saw a 25 percent increase compared to the previous year. Around 45 percent of deposits were in Lao kip while the rest were in foreign currency, mainly Thai baht and US dollars.
Most of the commercial banks were able to mobilise only short term investment funds, which accounts for 77 percent of total loan capital, while medium term funds account for 22 percent.
The shortage of long term funding poses a challenge for businesses which need long term finance to expand their businesses.
In an effort to address the long term funding shortage, the government established the Lao Securities Exchange, so as businesses can use it to mobilise investment capital independently of the banks, but only the two companies have listed so far.
The amount of credit provided to the business sector saw a more than 50 percent increase in 2012. Most of the loans were released to the trading sector, which accounted for 20 percent of the total loans, while the construction sector accounted for 19 percent, the services sector 14 percent, industry 10 percent and the agriculture sector 7 percent. Meanwhile non-performing loans represented only 1.5 percent of the total funds disbursed.
vientiane times
