Service improvement is key factor, says BOL official
Service improvement is key factor, says BOL official
The microfinance sector now worries that the provision of loans to the family businesses and small and medium d enterprises (SMEs) by major commercial banks in Laos may have an impact on its operation.
The group has long been the major provider of small loans to members of the community, making loans to small and medium d enterprises, family businesses and various smaller investment units.
They believe that various mega investment projects must be the main customers for large commercial banks, meanwhile the small and medium d enterprises or family businesses should be dependent on loans from microfinance alone.
The group's Chairperson Ms Vanhsy Chindavong said that the commercial banks charge lower interest rates with unlimited loans but microfinance has higher interest rates with limited loans.
“A large number of customers will go to the commercial banks because of the lower interest. That is a challenge for the microfinance sector,” she said.
According to Ms Vanhsy, the highest interest rate is 48 percent per year and the lowest 24 percent per year, which is much higher than commercial banks.
She noted that microfinance will be required to lower its interest rates and develop a variety of products to attract more customers rather than earning huge profits per loan.
Deputy Governor of the Bank of the Lao PDR (BOL), Mr Sonexay Sithphaxay, spoke to Vientiane Times in a phone interview yesterday saying “In fact, they don't have to worry about this matter because every financial institute has the same right to provide loans.”
“Most importantly, whether microfinance or a bank, they should work on their service improvements to ensure they meet the demands of customers,” Mr Sonexay stressed.
He explained that the government has already issued a special policy for microfinance in terms of lower registration capital as a top priority.
“This is an essential policy to encourage the small and medium d enterprises and family businesses to access loans,” Mr Sonexay said.
This year ACLEDA Bank, a Cambodia-based commercial bank operating in Laos since 2008, has issued additional loans of more than 487.9 billion kip (about US$60 million) for members of the community, focusing on family businesses and SMEs. The bank's CEO and Managing Director Mr Narin Phon said that the bank provided the loans based on its own policy and the Lao government guidelines to allow all members of businesses to access funds.
He explained that the bank issues a wide range of loans from US$100 or around 1 million kip to US$1 million (more than 8 billion kip) and the interest rate will be dependent on the loans.
“The interest rate depends on the of the loan, for example a loan of US$100 will be charged at 15-16 percent per year. If the loan is US$500,000 to US$600,000, the rate of interest will be around 11-12 percent per year,” he said.
