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Fund To Boost SME

Source: Vientiane Times/ANN

The government has issued a prime ministerial decree to establish a Small and Medium-Sized Enterprise Promotion Fund, hoping the intervention will boost business access to finance. 

Prime Minister Thongloun Sisoulith on September 4 signed the SME Promotion Fund decree giving a strong legal backing to its establishment and operation as it seeks to inject capital into small and medium-sized businesses.

According to the decree posted on the Lao National Gazette, one of the government’s channels to disseminate state policies, laws and regulations, the SME fund is a state organisation under the Ministry of the Industry and Commerce.

The administrative structure of the fund consists of a governing board, chaired by Deputy Minister of Industry and Commerce, whose role and duty is to set policy for the fund’s operations.

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The fund also consists of a committee in charge of policy implementation and inspection along with the administrative arm responsible for daily operations.

Under the PM decree, the fund as a state organisation has a duty to mobilise funds from various sources to provide low interest loans for SMEs and thereby contribute to Lao economic growth.

Key financial sources include the government, foreign grants, loans and income from SME loan interest repayments.

The decree also states that the release of SME funding must be through commercial banks or financial institutions.

The fund can finance joint ventures with sound business plans, provide seed capital for new entrepreneurs, or lend to established financially-sound businesses which cannot borrow from other sources.

The fund must prioritise low interest loans for the agricultural processing industry, handicrafts, agriculture and livestock businesses as well as tourism, according to the decree.

Under its lending policy, the fund cannot typically provide loans of more than 70 percent of an SME’s assets. If the fund wants to release up to 100 percent of a business’s assets, it needs to get approval from the Ministry of Industry and Commerce, the decree states. Only prioritised enterprises can have access to loans of up to 100 percent of their assets, according to the decree.