IFC Promotes Increased Access To Credit
Source: Vientiane Times
The International Finance Corporation (IFC), a member of the World Bank Group, is working with the Bank of the Lao PDR (BOL) to reform its credit-reporting framework.
This is part of a wider effort to improve the country’s financial infrastructure, facilitate lending for smaller businesses, and boost economic growth.
This information was outlined during an international symposium on credit reporting, held in Vientiane on Thursday with the support of Canada, Japan, Switzerland and the British Embassy, according to the IFC.
The event bought around 100 representatives, including government officials and managers of local and regional financial institutions, to raise awareness of the importance of credit reporting.
During the meeting, participating agencies shared various models of credit-reporting systems in the region. This will help BOL’s efforts to upgrade Laos’ credit-information bureau, a central platform that collates credit information about borrowers, the IFC said.
“A credit information bureau can perform the crucial function of gathering and distributing reliable credit information, improving creditor protection, enhancing competition in the credit market, and ultimately increasing access to credit,” BOL Deputy Governor Ms Vatthana Dalaloy said.
“Our partnership with the IFC will help us bring Laos’ credit-reporting infrastructure in line with international standards, enabling businesses to obtain the financing they need to grow and contribute to the economy.”
Access to finance is a major obstacle to doing business in Laos. Only 12 percent of micro, small, and medium enterprises have access to formal credit, and almost half of those in need of financing are unserved or underserved.
By allowing individuals and companies to build positive credit histories, a well-functioning credit-reporting system will help banks and microfinance institutions better manage credit risks, thus reducing lending costs and collateral requirements.
“Credit-reporting systems are a critical element of a country’s financial infrastructure and essential for creating a healthy financial sector and facilitating greater access to finance for smaller businesses,” Head of the IFC office in Vientiane Phongsavanh Phomkong said.
“They are also effective tools for financial institutions to manage credit risks, expand lending operations, and foster financial inclusion.”
This symposium is part of an ongoing IFC advisory project funded by Canada, Japan, and Switzerland to support the development of a standardised credit-reporting system in Laos.
IFC is a leader among the international financial institutions working in the area of credit-reporting reforms worldwide.
In East Asia and the Pacific, IFC has supported improvements in credit-reporting systems in several countries, including China, Cambodia, Indonesia, Papua New Guinea, Philippines, the Pacific Islands, and Vietnam.