SMEs still struggling to access finance
SMEs still struggling to access finance
Small and medium enterprises (SMEs) are still finding it difficult to access investment funds to expand their businesses despite the rapid increase in the number of private banks in Laos.
At present, there are more than 30 commercial banks in Laos. The rapid increase in bank numbers is supposed to help businesspeople access finance easier due to increased competition as they seek to release loans.
The government has introduced a policy to promote the establishment of private banks, hoping that increasing business competition will make it easier for businesses, in particular SMEs, to access finance.
The government expects SMEs to create jobs and income while sustaining economic growth. However a recent survey sponsored by the World Bank shows that access to finance is the second biggest problem cited by SME's in Laos when asked about obstacles to business, the biggest being tax.
The survey highlights that about 92 percent of the surveyed firms have a business bank account. However, only 19 percent of them said that they found it easier to obtain credit. Most of the firms said that they invested their own money to establish their business.
The story of a traditional massage shop manager in Sikhottabong district, Vientiane is typical of that of many SMEs in Laos. Her shop employs more than five people and most of them come from her hometown in Luang Namtha province.
She said that she wanted to expand her business after receiving increasing numbers of customers but she has to wait and save some more money so as she can rent a new shop and open a second one.
“Bank staff never come to offer me loans and I don't know how I can borrow money. I don't think that I can get a loan because I don't have enough assets to guarantee it,” she said.
Observers say most of the banks in Laos do not want to provide loans to SMEs because they have no business plan or assets to guarantee the loans. SMEs do not generate large revenues therefore most of the banks do not want to talk with them.
However SME operators say they think commercial banks should send their staff to potential businesses, advising them on how to set up a business plan and borrow money.
They are of the opinion that they should not ask for collateral to guarantee their loans if they can see businesses are running well.
Banks in other developing countries are very active as they want to have more customers so as they can make profits when releasing loans to business people, they said.
vientiane times
