BOL eyes business growth with dip in interest rate
BOL eyes business growth with dip in interest rate
The Bank of the Lao PDR (BOL) is hoping that a lower interest rate will spur the growth of the Lao economy while encouraging greater investment and a stronger business climate in the years to come.
According to a report by the BOL delivered last week at the 10th ordinary session of the National Assembly's (NA) Seventh Legislature, the interest rate was lowered from 5 percent to 4.5 percent in August.
BOL Governor Dr Somphao Phaysith said that since the lower interest rate was announced, the number of deposits made and loans issued by commercial banks had dropped over a short period of time.
“The percentage of Lao currency deposits dropped from 10 percent per annum at the end of 2014 to 7.7 percent per annum in November this year,” he said.
Meanwhile the number of short term loans fell from 12.7 percent to 10.5 percent while long term loans fell from 13.3 percent to 11.8 percent.
State-owned banks saw the lowest rate with 11 percent per year, the report said. At the same time, the number of foreign currency loans fell from 9.6 percent per year to 8 percent per year.
In addition, long term loans fell from 10.5 percent per year to 9.7 percent per year while deposits remained the same at 5 percent.
Commercial banks are continuing to accrue more capital with funds rising by 4.1 percent per month. Loans issued in Lao currency have increased by 1.6 percent per month.
“Overall, the lower numbers of deposits and loans are as we expected, and we expect loans in the local currency to double after the bank implements its planned fundraising system and has more capital,” Dr Somphao said.
BOL will continue to inspect the operations of commercial banks to ensure the adjustment of deposit and loan rates is properly carried out and regulations are complied with, in a bid to further boost the economy.
Almost a decade ago in 2006, Laos had only 12 banks. But the situation changed dramatically after the National Assembly approved the Law on Commercial Banks that year, in a bid to encourage banks to invest and issue more loans to businesses. Since then the number of banks has soared and as of the end of this year, there are now 40 commercial banks.
