SMEs needs low interest loans to prosper
SMEs needs low interest loans to prosper
Small and medium enterprises need low interest loans so that they will be able to survive once the Asean Economic Community (AEC) is established, according to a business re presentative.
The Young Entrepreneur Association President, Ms Valy Vetsaphong said last week that Lao SMEs are of the view that the current business loans, which commercial banks in Laos are offering, are simply too high to be viable therefore they are facing difficulties to obtain funds to expand their businesses.
“What I think of the challenges, which Laos is facing ahead of the establishment of the AEC is that the loan interest for SMEs is too high,” she said. “The loan interest for SMEs should not be more than 5 percent per annum. Providing low interest loans will make Lao businesses more competitive.”
Commercial banks in Laos offer loan interest ranging from 10 percent to 14 percent per year depending on the type of business and their performances. The businesses which can demonstrate concrete evidence of continuous and high profit may be able to access any low interest loans that are offered in the future.
Ms Valy, who owns a number of businesses in Laos, said that the government should play a major role in offering loan interest lower than the normal rates, adding that some countries subsidise their loan interest rates in order to boost the competitiveness of businesses.
“Some countries offer zero loan interest because they believe that the growth and expansion of businesses will create jobs and income. The government will also be able to expand their revenue sources once businesses see growth.”
The Lao government established SME loans several years ago but the available funds were insufficient. The government is developing a legal framework and is looking for financial support from international organisations to boost SMEs.
Bank officials said that it was logical for small and medium enterprises to demand low interest loans. However, they said that Lao entrepreneurs need to improve their businesses and produce qualified and competitive goods before they ask for low interest loans.
“Banks cannot offer low interest bank loans if they see high risk in businesses,” said a bank official who wished not to be named.
He said that Lao SMEs will need to learn from foreign business partners on how to produce goods which the market demands. He added that many SMEs in Laos produce uncompetitive goods.
According to trade officials, SMEs account for more than 80 percent of the business units in Laos. This implies that SMEs are the main foundation of the Lao economy. Various international organisations ha ve urged the Lao government to pay greater attention to SMEs as they employ a large percentage of the workforce.
