Germany backs access to finance for MSMEs

VIENTIANE (Vientiane Times/ANN) - Germany has approved an additional US$7.7 million for the Lao Access to Finance Fund (LAFF) to facilitate access to long-term finance for households and micro, small and medium enterprises (MSMEs) in rural areas.

The grant of EUR 6.8 million will be provided to the Bank of the Lao PDR through the KfW Development Bank.

This fund will also continue to strengthen capacity building for the Bank of the Lao PDR and partner financial institutions.

The contribution of Germany also continues to support the sustainable growth of the Lao economy by enhancing the business environment for MSMEs.

A handover ceremony for phase II of the Financing Agreements took place on Friday at the Bank of the Lao PDR.

The event was attended by Deputy Governor of the Bank of the Lao PDR, Mrs Vatthana Dalaloy; German Ambassador to the Lao PDR, Mr Jens Lütkenherm; and Country Director of the KfW Office in Vientiane, Mr Jan Wiegelmann. Representatives of LAFF committees and finance ministry officials were also present.

The Bank of the Lao PDR will act as the Project-Executing Agency for the Lao Access to Finance Fund. 

With the additional grant of EUR 6 million provided by Germany, the Fund will be able to extend the number of qualified partner financial institutions substantially, with banks and microfinance institutions able to allocate loans of up to LAK 500 million each to eligible MSMEs in rural areas.

Germany has provided an additional EUR 0.8 million for capacity building to strengthen the systems of the Bank of the Lao PDR and partner financial institutions of the Lao Access to Finance Fund. Speaking at the ceremony, Mrs Vatthana said “There is a great need for access to smaller sized loans for MSMEs, particularly in rural areas of the country.”

She said the additional funds for the LAFF would be able to accelerate access to funding for a much larger number of MSMEs.

“In addition, the Fund will contribute to the institutional strengthening of partner financial institutions of the Fund, which is necessary for the development of the Lao financial system,” she added.

German Ambassador Mr Jens Lütkenherm said the Fund would fill a significant gap, especially in rural areas, by enabling local entrepreneurs who run MSMEs to access financial services through the formal banking system and microfinance institutions.

“We do believe that with the additional funding, the Fund will be able to work with more partner financial institutions and it will be an effective tool to provide entrepreneurs with the necessary funds to develop their businesses, thus supporting the economic development of Laos and the well-being of its people.”

The primary purpose of the project is to support the commercial financial sector of Laos in providing sustainable and needs-based financial services to MSMEs in rural areas. This will contribute to improving private sector productivity and competitiveness and consequently support the creation of jobs and reduce poverty.

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