The International Finance Corporation (IFC) is promoting improved access to SME finance in Laos by facilitating a business enabling environment and developing market solutions for serving small and medium enterprises. SMEs are key drivers of economic growth and the primary engine of job creation in the country.
As a sister organization of the World Bank, IFC is the largest global development institution focused on the private sector in emerging markets.
SMEs account for more than 99 per cent of total enterprises and over 80 per cent of the workforce in Laos according to the latest economic census in 2013. Yet, they face a financing gap of US$1.2 billion and only 12.4 per cent of SMEs have a bank loan or credit line with banks. Of this, women-owned SMEs face a financing gap of US$340 million.
To help remove the financial hindrance to SME growth, IFC, in collaboration with the Bank of Lao PDR, today held a workshop on ‘Financial Solutions for Small and Medium Enterprises in Lao PDR’. The aim was to underline the need for a robust financial infrastructure and a favorable operating environment that encourages financial institutions to expand lending to SMEs in the country.
“A number of policy reforms have been made over the past few years to improve the regulatory framework for SME-finance activities,” said Vatthana Dalaloy, Deputy Governor, Bank of Lao PDR. “With IFC’s support, we will further enhance the financial infrastructure in line with the sector’s best practices. We also aim to help financial institutions build capacity and upgrade relevant skills to augment this segment.”
The daylong workshop brought together 200 participants—industry specialists from IFC and the World Bank and banks across Asia, Lao financial sector players and regulators—to discuss potential solutions for improved access to SME finance in Laos. Panelists deliberated on issues such as policy environment, regulations, and interest cap, among others. The event also explored emerging trends and innovations in SME finance.
With support from Japan and Switzerland, IFC has been working with the Lao government to strengthen a legal framework that enables the development of efficient and effective financial infrastructure in the country. The establishment of an online secured transaction registry system, an electronic credit information system, and a national payment system has significantly supported financial institutions’ lending activities. IFC has also partnered with local banks such as ACLEDA Laos and Banque Franco Lao
Ltd. to increase their lending to local SMEs.