Over 32b kip released for SME support
Over 32b kip released for SME support
Ministry of Industry and Commerce has provided funding of more than 32 billion kip (US$4 million) to ST Bank for short and long-term loans to small and medium-d enterprises (SMEs).
The subsidiary financing agre ement was signed yesterday in Vientiane between D irector General of the Department for Small and Medium Enterprise Promotion, Mr Somdy Inmixay, and ST Bank's Board Committee and Managing Director Mr Xaysana Xaysoulivong.
The event was witnessed by Deputy Minister of Industry and Commerce Mr Siewsavath Savengseuksa.
Limited access to finance has been identified as a significant restriction to business expansion in the country.
According to a survey in 2012, Laos had more than 127,000 enterprises of which 99.8 percent were SMEs.
“Only 24.6 percent of small d enterprises could access credit, while 46 percent of medium d enterprises could access credit,” Mr Somdy Inmixay said.
Financing for business was a critical issue which needed to addressed, he added.
Mr Somdy explained that commercial banks have hesitated to issue long-term loans for business as the banks generated much of their capital funding in short-term deposits from customers within the country.
Therefore, the ministry has sought a loan from the World Bank (WB) to bolster small and medium-d enterprises.
In August last year, the WB approved a US$10 million grant and US$10 million credit from the International Development Association (IDA) to support the growth and expansion of small and medium enterprises (SMEs) in Laos by providing access to long-term credit.
The SME Access to Finance Project is focusing on providing a line of credit to commercial banks to enable them to provide long-term credit to SMEs in local currency.
In this project, the IFC and the World Bank are also supporting the establishment of a risk-sharing facility to encourage commercial banks to lend to SMEs with limited collateral. In addition, the project will provide technical assistance to strengthen the department's ability to formulate and implement public policies that promote access to finance for SMEs.
“After receiving funding for the provision of credit, the bank plans to properly divide funding so that SMEs can more easily access long-term credit,” said the bank's Deputy Managing Director Mr Bounpone Phoutthavong.
ST Bank has one head office in Vientiane and three branches in Pakxe, Savanna khet, and Luang Prabang.
The bank is preparing to open another new branch in Bokeo province early next year.
According to the bank's estimation, Vientiane Head Office will obtain about 10 billion kip of capital funding to issue to SMEs in Vientiane and neighbouring provinces.
The bank will issue 6 billion kip to Pakxe Branch, 6 billion kip to Savannkahet Branch, 5 billion kip to Luang Prabang Branch, while Bokeo branch will obtain around 5 billion kip,.
He said the bank's target was to issue loans of up to US$200,000 to SMEs with 99 workers or less at an appropriate interest rate.
