Bank receives financing to bolster SMEs in Laos
Bank receives financing to bolster SMEs in Laos
The International Finance Corporation (IFC), a member of the World Bank Group, has committed a loan of US$10 million to Banque Franco Lao. Ltd. (BFL) to finance small and medium enterprises (SMEs) in Laos.
With this, the lender aims to double its SME loan portfolio to more than US$100 million by 2020.
While SMEs employ up to 70 percent of the total labour force in Laos, they contribute only around 16 percent to the country’s gross domestic product, much lower than their peers in other regional nations.
An agreement signing ceremony was held on Monday in Vientiane between Deputy Managing Director of the BFL Commercial Division, Mr Bounmy Sengphachan, and IFC Head of the Lao PDR, Mr Phongsavanh Phomkong.
Speaking at the signing ceremony, Mr Bounmy Sengphachan said “We believe that there are many more women entrepreneurs in the country who with the right financial support and advice can also develop successful businesses. There are significant opportunities for businesswomen in Laos and we have seen many of them develop successful companies that have thrived in the growing Lao economy.”
He said this loan would help BFL expand its outreach to SMEs, especially women-owned businesses as it has been proactively enabling women entrepreneurs in Laos to access finance and providing tailored financial solutions as well as financial education and support.
Lack of access to finance is a key obstacle to their business growth and contribution to the economy. Less than 20 percent of SMEs can access long-term credit, which makes it difficult for them to grow and compete against other SMEs in Asia.
Drilling down further into the SME segment, there is significant capacity and opportunity for women entrepreneurs to develop more businesses in Laos if they can access bank financing. A majority of them tend to use savings or informal funding to fulfil their financing needs, and this hampers the growth potential of their businesses.
Mr Phongsavanh said this is IFC’s second investment supporting the bank as a long-term partner. In 2015, IFC provided a risk guarantee facility for BFL’s portfolio of loans to women-owned SMEs in Laos, enabling BFL and IFC to share the potential risk arising from the future portfolio of credit to women businesses.
He said “IFC shares BFL’s strong vision and commitment to provide financing to small and medium enterprises. Access to long-term funding will help SMEs expand business and improve competitiveness, contributing to job creation and poverty reduction in the country.”
According to a press release, the IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, it uses its six decades of experience to create opportunity where it’s needed most.
In FY16, its long-term investments in developing countries rose to nearly US$19 billion, leveraging its capital, expertise and influence to help the private sector end extreme poverty and boost shared prosperity.
