BusinessGovernmentInvestmentsLao Economy

Billions Allocated To Small, Medium Enterprise Promotion

Source: Vientiane Times

More than 2,715.8 billion kip will be sourced and allocated for the promotion of small and medium enterprises (SME) to facilitate better access to finance to grow their businesses.

In this regard, the government will allocate 200 billion kip from the state budget.

The remaining more than 2,515.8 billion kip (US$300 million) will be sourced from elsewhere following a resolution of the National Assembly (NA).

Members of the legislature have called for the government to amend relevant regulations to better manage the SMEPDF to ensure it functions more efficiently.

Passed by the NA’s recent fifth ordinary session, the resolution stated that the government would source the more than 2,715.8 billion kip for the existing SME Promotion and Development Fund (SMEPDF).

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“Creating conditions to enable SME operators to easily access to finance with a supportive interest rate and borrowing period is necessary,” NA Secretary General Mrs Suansavanh Vignaket told the government as she presented the draft resolution which was passed by majority vote.

The resolution did not provide further details about where the US$300 million will be sourced.

China pledged to provide a loan for the promotion of SMEs amounting to some US$300 million, a commitment made during a state visit to Laos by President Xi Jinping in November last year.

The government’s recent report suggested that Lao authorities in charge are working with their Chinese counterparts to utilise the pledged financing.

Operators of SME, which account for more than 90 percent of registered firms in Laos, have named difficult access to finance as a challenging issue for their business operations.

In an attempt to enable more SMEs to access finance, the SMEPDF was set up in 2011 with more than 33.5 billion kip (US$4 million) financial support as provided by the Asian Development Bank. In 2015, the World Bank provided more than 166.4 billion kip (US$20 million comprising US$10 million in loans and US$10 million in grants) for the promotion of SMEs through credit and technical assistance schemes.

The funds, overseen by the SMEPDF, were loaned to SMEs via commercial banks at interest rates ranging from 7 to 9 per cent per annum.

To better promote and develop the SME including to ease their access to finance, the government agreed in its cabinet meeting for June to amend the Prime Ministerial Decree on the SMEPDF.

Efforts will be made to scrutinise and prioritise potential SMEs to be promoted. The government has also announced plans to expand the SMEPDF in a bid to increase financial access coverage. Prime Minister Thongloun Sisoulith told the recent NA’s fifth ordinary session that promotion of SMEs is among the eight core measures the government is pushing to boost economic growth.