On the 5th of
April 2019, the Lao Access to Finance Fund (LAFF) Management Unit of the Bank
of Lao PDR (BoL) organized a roundtable workshop to exchange about LAFF.
The main
objective of the workshop was to discuss the progress, outstanding issues and
the proposed ways forward under the framework of LAFF management and
implementation. The workshop was chaired by Ms. Fongchinda Sengsourivong,
Director General of the BoL Banking Operations Department of and LAFF Director
on behalf of the LAFF’s executive agency; and co-chaired by Mr. Florian
Sekinger, Regional Manager Sustainable-Economic Development East Asia of KfW.
During the
workshop six main topics were discussed:
Partner Financial Institutions (PFI) selection: Based on expressions of interest of 10 financial
institutions (5 commercial banks and 5 deposit-taking microfinance
institutions – DTMFI) and after the assessment and screening conducted by
the LAFF’s loan allocation preparation sub-unit, 5 financial institutions
(2 commercial banks and 3 DTMFIs) were shortlisted. Further assessment
conducted by the Commercial Bank Supervision Department for commercial
bank applicants and the Financial Institutions Supervision Department for
MFI applicants concluded that one commercial bank and one DTMFI are
proposed to be considered by the LAFF steering committee.
Market-based Interest rates: According to fundamental LAFF principles, the fund
will use only market-based interest rates. KfW and BoL agreed on the
calculating method on market-based interest rates for the LAFF
debt-finance by using the average interest rate for long-term deposit
charged by the commercial banks and DTMFIs in the Lao PDR. In conclusion,
the interest rate of the LAFF debt-finance for commercial banks is
currently derived to be 7.0 % nominal per annum, while for DTMFIs it is
11.50%.
PFI eligibility criteria: As agreed, the eligibility criteria for LAFF I will
remain strict for banks and will be detailed over time MFIs based on an
internationally oriented benchmark study to be prepared by AFC. On the
other hand, the project documents for LAFF II will aim at creating more
room for maneuver for the LAFF management unit (LMU) in terms of adapting
core criteria depending on movements in market conditions.
KYC-criteria for PFIs (background check): The background check on owners, BoD members and core
managers of PFIs is recognized as a check of utmost importance. It was
agreed that the KYC-check will be done by the Commercial Bank Supervision
Department and the Financial Institutions Supervision Department, and be
explicitly mentioned in the respective assessment forms.
Operational Manual preparation: The development of the Operational Manual had been
defined high priority by BoL during the last workshop. AFC presented the
progress on the preparation.
Capacity building for BoL: The workshop participants discussed, identified and
agreed on various training courses for the LAFF management unit, such as
fund management, LAFF-related financial indicators and business English.
In conclusion,
the workshop successfully achieved the set objectives and came up with some
follow-up action points that will be further taken over by the LAFF management
unit of BoL and the AFC consultant team.
Discussed topics, feedback and actions
agreed upon:
Topic 1: Whatsapp Group use for
contact:
AFC, LAFF
management unit & Lao IT Dev agreed that we should have Whatsapp group
which would be convenience way use for contact to each other and the group
will be created by Lao IT Dev side.
Topic 2: Provide Information for Lao
IT Dev:
Lao IT Dev want
Information, photo that they will use in their website development process.
AFC and LAFF management Unit will provide necessary information for Lao IT
Dev which should approve by BOL side indeed.Lao IT Dev also
need to know who will be the main coordinator for them, and LAFF management
Unit said that would be Mr. Bounlam Sitaphone (Officer Credit Division of
BOD).
Topic 3: LAFF website development
process:
Lao IT Dev side
will provide the timeline and share with AFC, LAFF management Unit on Monday
14th October 2019.Lao IT Dev will
have an appointment with AFC and LAFF management Unit every 2 weeks for
discussion about LAFF website.BOD allow IT
department of BOL look after the website development process in the part of
their technical.
VIENTIANE (Vientiane Times/ANN) – The grant of 0.8
million euros was provided through Germany’s KfW Development Bank.
Germany has committed 0.8 million euros for the Lao
Access to Finance Fund (LAFF) to strengthen capacity building and training of
the Bank of the Lao PDR (BOL) and partner banks.
The grant in the amount of 0.8 million euros was provided
through Germany’s KfW Development Bank.
The handover ceremony took place on Tuesday at the BOL in
the presence of Director General of Banking Operation Department, BOL Ms
Fongchinda Sengsourivong, KfW Country Director Lorenz Gessner and a
representative of Ministry of Finance.
“The additional grant for the Lao Access to Finance Fund
will further strengthen the banks’ capacity and quality participating in the
fund which will have in turn positive effects on the overall services provided
by the banks to the private sector in order to develop and expand,” Fongchinda
said.
“The consulting services for delivering training and
capacity building to the BOL and the partner banks are vital components for
reaching the overall and specific objectives of the programme, which is the
support of the commercial banking sector in Laos in providing sustainable and
needs-based financial services for poor households and micro, small and medium
enterprises (MSME) in rural areas,” cited KfW Country Director Lorenz Gessner.
According to KfW, the first bank participating in the
LAFF is ACLEDA Bank Lao, which has successfully disbursed more than EUR 3
million over the last two years to MSME in Laos with an average loan size of
2,600 euros.
The programme objective is to facilitate the access of
MSME to long-term finance in the domestic financial sector by offering eligible
partner banks a target group oriented refinancing facility, which is aligned
with the existing business environment of the local banking system.
The rationale of the focus on MSME is the expected above
average impact on poverty alleviation through job creation and income
generation.
KfW Development Bank is Germany’s leading development
bank and an integral part of KfW. It carries out Germany’s Financial
Cooperation with developing countries on behalf of the Federal Government.
It goals are to combat poverty, secure peace, protect the
environment and the climate and make globalisation fair. KfW is a competent and
strategic advisor on current development issues.
ACLEDA Bank Lao Ltd. CEO and Managing
Director Narin Phon (left) shakes hands with BOL Banking Operations Department
Acting Director General Oth Phonhxiengdy after signing the agreement
Grant funding to
the Lao PDR, Ministry of Finance.
Ministry of
Finance channeled to Bank of Lao PDR to manage (BoL = Project Executive Agency).
2. Principal
Initial principal
EUR 3.0 million.
Accrued interest EUR
1.0 million, on separate account.
Additional (2020)
EUR 6.0 million.
Total (2020) EUR
10 million.
3. Interest income
Expected annual-interest
income (2020): EUR 1.0 million.
BoL can propose
usage for its own benefits (e.g. trainings, exposure trips).
4. Characteristics
Project-based: no legal personality, contracting in name BoL
Wholesale
debt-finance facility in LAK: loans
to banks and DTMFI (PFIs) in LAK
Market based:
interest rate
charged to banks and DTMFIs is in line with comparable liability funding;
No interference
in PFIs’ credit policies (e.g. selection of MSE-borrowers);
No interference
if PFIs’ marketing strategies (e.g. type of sectors, locations, pricing of
loans to MSEs)
Conditional:
Strategic interest
in lending to MSEs, including informal enterprises;
Institutionalization
of term lending (loans with duration of over 1 ½ year duration);
Outside urban
areas of Vientiane Capital;
Minimum 30% for
agricultural activities.
5. LAFF-Project
Management
LAFF Steering
Committee (LSC)
Mandate: Oversees and signs-off loans to PFIs, and annual
workplan and budgets for LAFF’s Management. Requests and receives
external-audit reports.
Composition: Deputy Governor (Chair), DG of BOD
(Vice-Chair), DDG of BOD, DDG of BSD, DDG of FISD.
LAFF Management
Unit (LMU)
Mandate: Management of operations, external and internal
communication.
Director: Responsible for effective management in accordance to
project’s principles. Reports to LSC. Manages relationship with BSD and FISD
(see below).
Secretariat: Internal and external communication, the latter
including the logistics of the Call for EoI process; preparation annual
workplan and budget. Supports Director.
Loan Allocation
Preparation subunit: Does financial
analysis and due diligence of EoI-applicant banks and DTMFIs. In many ways the
most important part of the overall governance and operational structure that
requires high-levels of expertise. Prepares credit memorandum for LSC.
Loan Administration and
Reporting subunit: Makes loan
contract; issues notifications for installments of interest and principal;
requests reports from PFIs; administers the LAFF portfolio and reports on it.
Another main part of operations.
6. Involved External Stakeholders
BSD and FISD: do repayment-capacity assessment and due diligence
screening for and on request of the Director of the LMU based on off-site
reports and on-site inspections.
KfW: have to give no-objection to main LAFF-management
decisions (e.g. LAFF-lending, annual workplan and budget).
External
Consultant: to be hired by LMU to
support LAFF-management processes, funded from LAFF-interest income
External
Auditor: external audit and
evaluation reports, to be instigated and received by LSC, funded from
LAFF-interest income.
AFC: technical assistance provider.
7. Technical Assistance
LMU Director
and LAP: financial analysis, due
diligence process, Excel-based, with written explanation and in-person
teaching.
BSD and FISD
LAFF-Teams: repayment-capacity
assessment and due diligence processes
LMU Director
and LAR: Excel-based LAFF-loan
portfolio administration and reporting; loan-contract screening, with written
explanation and in-person teaching.
Operational
Manual: Codification management and
operational processes.
