Mr Sonexay Sitphaxay, who was formerly the bank’s acting governor, was promoted to the top position following approval last week by the National Assembly.

The bank’s governor is a highly influential official who has the power to monitor and drive the finance and economic sectors. Those who hold this post must have a deep knowledge of banking and economics. The bank’s chief has to keep a close eye on internal and external economic circumstances that determine monetary policy.

Mr Sonexay has a lot of experience in banking management. He successfully managed Laos’ leading commercial bank - Banque pour le Commerce Exterieur Lao (BCEL) - for many years. With the strong growth of BCEL’s business and services, the bank was listed on the Lao stock market. BCEL was the first bank to sell shares in the stock market and when listed became the Banque pour le Commerce Exterieur Lao Public.

Because of his success at BCEL, Mr Sonexay was promoted to be the deputy governor of BOL. Recently, he was appointed acting governor of the bank, replacing the outgoing governor, Dr Somphao Phaysith, who made an immense contribution while working in the banking sector for more than 30 years.

Taking the bank’s top position is a big challenge in terms of overseeing and developing banking and finance services. At the same time, the bank’s chief has to find ways to stabilise foreign currencies, strengthen the value of the kip and support domestic production and investment at a time when the country continues to rely heavily on imports.

Most stakeholders want to see a positive change in the way the bank helps small and medium businesses, especially with regard to access to finance. This problem has been discussed at many levels but solutions and their implementation are not very clear as yet.

In the past, banks were concerned about the risks associated with SMEs and were reluctant to provide them with low-interest loans. Banks also feared the risk of being saddled with even more non-performing loans. Banks only provided loans to SMEs at the market rate to prevent risks, making it difficult for SMEs to obtain the capital they needed for growth.

Promoting SMEs and encouraging banks to provide easy access to finance is a part of the government’s policy. The State promotes SMEs because it wants to boost domestic production, expand sources of revenue and increase employment, but banks are still concerned about the possibility of losses if they issue loans to small businessses.

Banks that issue loans operate commercial services and need to be cautious about taking a decision to issue a loan. However, the BOL has to continue with a clear policy of supporting SMEs.    

Managing Money Flow (M2), exchange rates, foreign currencies and foreign reserves, and fund mobilisation are other major tasks for the BOL under the leadership of the new governor. Some of these tasks have been included in Prime Minister’s Order No. 12, issued on August 23, 2018, regarding the implementation of eight measures to stimulate economic growth.

An economic researcher advised BOL not to worry too much about M2 control because enforcing stricter measures to manage this problem may curb micro and macro-economic growth. Inflation too is still very far from the limit and it is not necessary to be too strict on M2 control. Over the first nine months of this year, the inflation rate rose to 2.08 percent and is still below the 5 percent set in the annual control plan.

The management of fund mobilisation should be prioritised by BOL because, in the past, some companies persuaded people to invest in their business and then failed to return their deposit. Some microfinance services also resorted to similar steps.

One more thing the BOL must do is improve policies to stimulate business and production and work closely with other State organisations to drive the management of foreign currencies and foreign reserves in the same direction.

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