IFC continues to expand access to credit in Laos
IFC continues to expand access to credit in Laos
The International Finance Corporation (IFC), a member of the World Bank Group, continues to boost moveable finance practices among Lao banks to increase lending to micro, small, and medium enterprises (SMEs).
Acting IFC Country Manager for Laos, Cambodia, and Vietnam, Mr Georges Joseph Ghorra and Deputy Minister of Finance, Ms Thipphakone Chanthavongsa signed a Memorandum of Understanding (MoU) to this effect in Vientiane ye sterday.
The MoU signed between State Assets Management Department o f the Ministry of Finance and IFC for secured Transactions Project Phase II aims to continue to help promote lending against moveable assets among Lao banks by building their moveable finance capacity and developing relevant financing products.
The MoU follows the IFC's support to the government over the past six years in preparing the legal framework for secured transactions and setting up a secured transactions registry system that allows smaller businesses to use moveable assets such as valuable materials, machinery, vehicles, inventory or raw materials, accounts due, financial instruments, agricultural crops, consumer goods, bank deposit accounts and intellectual property as collateral for obtaining loans.
“Introducing a moveable assets-based lending framework helps unlock significant financing for SMEs who find access to finance a key obstacle to doing business,” Ms Thipphakone explained according to the IFC press release.
She said micro businesses and SMEs make up more than 98 percent of the private sector in Laos but most have been unable to get a loan until recently, as they didn't own land or buildings that banks accept as security.
Since the launch of the registry system in late 2013, more than US$1.2 billion in loans has been granted with moveable assets as security, 99 percent of which are for enterprises.
IFC C ountry Manager for Laos, Cambodia, and Vietnam, Mr Kyle Kelhofer said in a country with a fast-developing economy such as Laos, the credit market for smaller businesses has great potential to grow.
As s oon as the financial infrastructure for lending against moveable assets is ready, a whole new world of financing and growth opportunities open up for both enterprises and banks.
By developing moveable finance products, banks can expand SME lending portfolios, while enterprises can obtain much-needed financing to grow their business, expand production, and create more jobs.
IFC's support to the Lao government under this Memorandum of Understanding is implemented in partnership with Canada, Japan, and Switzerland.
