SME Access To Finance in Lao PDR

The views expressed in this presentation are the views of the author and do not necessarily reflect the
views or policies of the Asian Development Bank Institute (ADBI), the

Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts
no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.
SME Access to Finance in Lao PDR
How Digital Innovation Can Help SME Access to Finance in

Asia, 30 October 2018
By Ms. Sengkeo Phoutthavong
- Deputy Director of SME Fund Management Division.
- Department of SME Promotion
- Ministry of Industry and Commerce.
ກ ່ົ ງເສ
ົ ມສ ີ ມ ິ ວສາຫະກ
ິ ດຂະໜາດນ
້ ອຍ ແລະ ກາງ
Department of Small and Medium Enterprise Promotion
Contents
I. SMEs Definition.
II. Number of SMEs in Laos 2013.
III. Policies and Regulations for SME Promotion and
Development.
IV. SME Promotion and SME Development Plan 2016-
2020.
V. SME Promotion and Development Fund.
VI. Financial for SME.
VII. Difficulties of SME access to Finance.
VIII.Current financial technology.
ົ ມສ ິ ມວ
ິ ສາຫະກ
I. SME Definition
Sectors Worker Asset (LAK) Income (LAK)

Industry 1--5 Not over 100 million Not over 400 million
Micro Trade 1--5 Not over 150 million Not over 400 million
Service 1--5 Not over 200 million Not over 400 million
Industry 6--50 Not over 1.000 million Not over 2.000 million
Small Trade 6--50 Not over 1.000 million Not over 3.000 million
Service 6--50 Not over 1.500 million Not over 1.500 million
Industry 51--99 Not over 4.000 million Not over 4.000 million
Medium Trade 51--99 Not over 4.000 million Not over 6.000 million
Service 51--99 Not over 6.000 million Not over 4.000 million
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II. Number of SME
2013 Units Share

SMEs 124,567 99.8%
Below 5 workers 107,266 85.9%
5 -- -9 workers 11,488 9.2%
10 - 99 workers 5,744 4.6%
Large Enterprises 375 0.3%
Total 124,873 100%
Estimate 20% of SME can access

financing from the commercial bank.
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III. Policies and regulations for SME Promotion for
SME Promotion and Development.
 Prime Minister’s Decree No. 42/PM, dated 20 April 2004 on the
Promotion and Development of Small and Medium Enterprises.
 Prime Minister’s Decree No. 123/PM, dated 3 March 2010 on SME
Promotion and Development Fund. Purposes of SME Promotion
Fund is to accumulate the sources for contributing to financial
institution and credit programs concerned on providing the credit to
SMEs, and to cover the budget for strengthening capacity building of
SME through technical assistance project. In 2018, Amending SME
Fund Decree 123/PM base on Law on SME Promotion No. 011/N.A.
 Law on SME Promotion No. 011/N.A, dated 21 November 2011
(Decree No. 42/PM has been upgraded to Law).
 SME Promotion and SME Development Plan 2016-2020.
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IV. SME Development Plan 2016-2020
7 Policy Areas of the SME Development Plan 2016-2020:

1. Policy to Promote Productivity, Technology and Innovation.
2. Policy on Access to Finance.
3. Policy to Promote Access to Business Development Services
(BDS).
4. Policy on Market Access and Expansion.
5. Policy on Entrepreneurial Development.
6. Policy to Create Favorable Environment for Businesses.
7. Policy on Customs and Tax Incentives and Financial
Assistance.
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IV. SME Development Plan 2016-2020 (con-ed)
6 Measures under the Policy Area on Access to Finance:

1. Developing diversified financial products and services for
SMEs.
2. Capacity building for commercial banks and financial
institutions, including microfinance institutions.
3. Capacity building for SMEs to access to finance.
4. Enhancing capacity of the SME Fund.
5. Research and feasibility study on the establishment of a
Specialized Financial Institution for SMEs.
6. Capacity building for related organizations to support access
to finance for SMEs.
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V. SME Promotion and Development Fund
 Decision by the Government on the allocation of US$4 million

(32 billion Kip) from the ADB Private Sector and SME
Development Program (PMSE) as seed money for the Fund in
2012.
 Two Financing Agreements with total amount of 30 billion Kip
were signed with the Lao Development Bank (LDB) for on-
lending to SMEs.
 Some achievements of the SME Fund as of June 2018:
o Lending to SMEs by LDB: 193 contracts with 100 SMEs .
o Provision of funding for 38 technical assistance projects
with total amount of 1,9 billion Kip.
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V. SME Promotion and Development Fund (con-ed)
 Mobilization of further funding, including the US$20 million World

Bank SME Access to Finance Project have 2 components:
o A Line of Credit for on-lending to SMEs: US$15 million through
4 Participating Financial Institutions (PFIs): ST Bank, Lao China
Bank, Sacom Bank and Lao Viet Bank - for on-lending to SMEs;
o Technical Assistance: US$5 million for technical assistance to
enhance capacity:
• DOSMEP and relevant agencies;
• PFIs and relevant financial institutions (contract signed with
AFC) – implementation is under way;
• SMEs (contract signed with ILO to enhance capacity of 600
SMEs) – implementation is under way.
ິ ສາຫະກ
VI. Financial for SME
 US$4 SME Promotion Fund.

 US$15 from the World Bank, SME Access to Finance Project.
 There are 43 banks, most of them providing credit to SME.
 EUR 3 from KFW.
 In the processing of negotiate between Bank of Lao PDR and
People Republic of China amount US$37,5 million.
ິ ສາຫະກ
VII. Difficulties of SME access to Finance
 Bank loan application involves many processes which can be

time-consuming and costly.
 Financial planning and management skills of SMEs are limited.
 SMEs do not have or have insufficient collateral.
 SMEs particularly unregistered micro enterprises do not
maintain proper and accurate book keeping that making
difficulty for banks to evaluate their financial status.
 SME do not use banking services.
 Lack of information on sources of funding.
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VIII. Current financial technology
Mobile banking (Application)

QR Codes
ATMs (Depository)
EDC Machine
Credit & Debit Cards
E-banking
ິ ສາຫະກ
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Thank you
for your
Attention
ິ ສາຫະກ
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SME Access To Finance in Lao PDR

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The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian Development Bank Institute (ADBI), the

SME Access to Finance in Lao PDR

How Digital Innovation Can Help SME Access to Finance in

Sectors Worker Asset (LAK) Income (LAK)

2013 Units Share

Estimate 20% of SME can access

7 Policy Areas of the SME Development Plan 2016-2020:

6 Measures under the Policy Area on Access to Finance:

 Decision by the Government on the allocation of US$4 million

 Mobilization of further funding, including the US$20 million World

 US$4 SME Promotion Fund.

 Bank loan application involves many processes which can be

Mobile banking (Application)

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