MOIC has signed agreements to allocates funds to promote MSMEs, SMEs
The Small and Medium-sized Enterprise (SMEs) Promotion Department has signed agreements to allocate US$16 million to five commercial banks to provide loans to promote SMEs amid the Covid-19 pandemic.
The ceremony for signing the agreements between the department under the Ministry of Industry and Commerce together with various commercial banks was held in Vientiane on Wednesday. The signing of the pacts was witnessed by the Minister of Industry and Commerce, Dr Khampheng Saysompheng, and senior officials from line ministries and banks.
The department has allowed and assigned five commercial banks include VietinBank, Sacombank Lao, LaoVietBank, Maruhan Japan Bank Laos and Laos China Bank Co., Ltd to distribute funds as financial support from the Lao PDR Micro, Small and Medium Enterprise Access to Finance Emergency Support and Recovery Project (MSME A2F-ESR Project).
The government will also provide 94 billion kip more to four commercial banks Lao Development Bank, Sacombank Laos, LaoVietBank and Maruhan Japan Bank Laos and another 5 billion kip to the Xaysomboun Development Fund to provide loans to residents of Xaysomboun province with a low interest rate of 3 percent per year.
The Country Manager for the World Bank in Laos, Mr Alexander Kremer also mentioned that the pandemic has slowdown the growth around the world especially MSMEs who play a significant role in the Lao economy and are critically important for the livelihoods of the Lao people, accounting for around 99 percent of registered firms and according to the 2013 economic census conducted by the Lao Statistics Bureau, 82 percent of total employment.
The MSME A2F-ESR Project was prepared during the pandemic as a follow-on project after the successful implementation of the SME Access to Finance Project (SME A2F) which aims to help small businesses withstand the impact, and recover from the crisis by facilitating access to finance which has been identified as one of the top three prominent obstacles facing MSMEs according to the 2018 Enterprise Survey.
The project will enhance access to finance for MSMEs in the context of the Covid-19 emergency and boost recovery through a combination of Line of Credits (LOCs) to MSMEs, technical assistance to strengthen the capacity of financial institutions to lend to MSMEs, and technical assistance to increase capacity of MSMEs.
The project will also support government efforts to establish a Partial Credit Guarantee (PCG) facility to backstop bank lending to MSMEs, this will also support the MOIC in developing and implementing policies to support Lao MSMEs. Representatives of commercial banks also advised borrowers that access to finance for SMEs will not be a big issue if they comply with loan conditions set by banks.