80 billion kip low-interest loans issued to SMEs, parliament told

Low-interest loans worth as much as 80 billion kip (more than US$8.6 million) have been provided to small and medium enterprises (SMEs) so far, a senior government official has told the National Assembly (NA).
The government has allocated 200 billion kip for its SME Promotion Fund to be issued to SMEs through commercial banks at a uniform interest rate of just 3 percent in a bid to provide small businesses with financing.
Deputy Minister of Industry and Commerce, Mr Somchit Inthamith, told the recent NA session that applicant SMEs need to meet certain criteria in order to obtain a loan.
He was responding to questions raised by NA members who asked the government to explain why obtaining financing involved so many time-consuming and complicated procedures for SMEs. They said this hindered the growth of SMEs and called on the government to address the matter.
To be eligible for a government-subsidised loan, SMEs must meet the following criteria:
Have a clear business plan, Complete SME professional training certified by the industry and commerce sector or authorised body, Keep accounts in accordance with the Law on Accounting and have no non-performing debts to banks or other financial institutions.
These criteria have been set to ensure that loans are used beneficially to sustain funding and prevent it from becoming a non-performing loan, Mr Somchit said.
As a compromise, borrowers will be given one year to prepare themselves and set up a comprehensive accounting system.
“SMEs have one year to improve their operations and keep proper accounts. If they are unable to do this after one year, they will have to pay interest at the commercial rate, not the 3 percent rate,” he told the session.
Four SME service centres – one each in Vientiane, Luang Prabang, Savannakhet and Champassak - have been opened to provide coaching and training for businesses.   
Priorities are given to four business sectors when it comes to applying for loans, namely agricultural product processing, handicrafts, crop planting and animal farming, and tourism.
So far, businesses in 13 provinces have secured loans.
Businesses wanting to apply for a loan can approach the Lao Development Bank, LaoVietBank, Sacombank Lao, Maruhan Japan Bank Lao, and Xaisomboun Fund – the five financial institutions selected by the government to issue and manage loans.
It was reported previously that the maximum amount that could be loaned to micro SMEs is 1.5 billion kip per agreement. For small enterprises the amount is 3 billion kip per agreement and for medium-sized enterprises the amount is 4 billion kip. All enterprises will pay 3 percent interest on the loans.
Regarding a claim raised by NA members that businesses had to pay to attend a professional training course, Mr Somchit said that until recently the government had financed the training, which meant that businesses did not have to pay.
The government issued a notice on October 14 stating that it would finance the training, he added.
The government’s subsidised loans coupled with loans lent by commercial banks to SMEs has totalled 20,000 billion kip to date, according to Mr Somchit.
The government places great importance on helping SMEs to obtain financing, as they are an integral part of the economy.
SMEs account for about 99 percent of all registered businesses in Laos and about 82 percent of jobs, according to the World Bank.

By Souksakhone Vaenkeo
(Latest Update November 27, 2020)