Lao enterprises identify access to finance as an issue
Lao enterprises identify access to finance as an issue
Businesses in Laos still face difficulty in accessing finance despite the rapid growth of financial institutions in the country, according to a new enterprise survey.
The Ministry of Planning and Investment, Lao National Chamber of Industry and Commerce and GIZ officially unveiled the latest enterprise survey in Vientiane last week, aiming to provide policymakers and business people with an understanding of the opportunities and challenges Lao enterprises are facing.
According to the survey funded by GIZ and conducted by the National University of Laos' Faculty of Economics and Management, access to finance and investment capital was one of the key constrai nts which enterprises in Laos identified.
Most of the enterprises said despite the rapid growth of the banking sector in Laos, they found it difficult to access credit from financial institutions and commercial banks due to their complex loan application procedures and high lending rates.
The number of commercial banks and financial institutions in Laos has increased rapidly over recent years thanks to government policy boosting investment in the sector, one of the main conditions needed to enable enterprises to have access to finance. At present there are more than 30 commercial banks in Laos.
However, most of the commercial banks provide loans to real estate and infrastructure projects, in which they have more confidence providing loans. The banks are reluctant to provide credit to many small and medium enterprises as there are a number of investment risks.
A number of National Assembly members have urged the Bank of the Lao PDR to implement concrete measures to channel funds and loans to the small and medium enterprise sector, enabling businesses to secure a profit and be able to pay off the bank loans.
They also said that enterprises, which produce goods for domestic consumption and export, should be able to gain easier access to loans so they can expand their businesses, creating jobs and income for Lao people and lifting them above the poverty line.
The lawmakers also said the lending rates should be lower so the enterprises can access cheaper investment capital. At present, lending rates in Laos range from 10 to 14 percent a year depending on the borrower.
A neighbouring country offers lending rates of about 6 to 8 percent, which increases their businesses' competitiveness ahead of the establishment of the Asean Economic Com munity.
Bank officials admitted that it was not easy to direct funds to a particular economic sector, adding that the commercial banks could not provide cheap loans to business investment projects, which they considered to be higher risk.
At present, Non Performing Loans of the Lao Banking sector are below the ceiling of 3 percent.
vientiane times
