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ACLEDA Bank Lao to Receive Funding for Small Rural Businesses

ACLEDA Bank Lao to Receive Funding for Small Rural Businesses

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

The Lao Access to Finance Fund (LAFF) will provide a long term (six year tenure) local currency loan to ACLEDA Bank Lao Ltd. on a fixed interest rate in order to refinance loans to households, micro, small and medium enterprises in rural areas. The on-lending agreements between the Finance Ministry and the Bank of the Lao PDR (BOL) as well as between the BOL and ACLEDA were signed on Thursday. With the signing of the agreements, ACLEDA will be the first partner bank to join the LAFF and to receive the funds available in the programme. “The German government through KfW has never before supported small businesses in Laos through a commercial bank. Therefore, we are witnessing a historical moment in the relationship between the two countries and the three institutions,” KfW Country Director Lorenz Gessner said. KfW Development Bank is Germany’s leading development bank and an integral part of KfW. “We are sure that LAFF will give small businesses the possibility to have better access to loans and to the formal banking sector, which will definitely stimulate the economy on a small scale in the beginning,” Mr. Gessner said. “As we see in Germany, small businesses can become the backbone of a powerful economy. We are confident that this programme will support further economic growth in Laos.”

Germany is supporting the sustainable economic growth of the Lao economy by enhancing the business environment for Lao entrepreneurs and the banking sector. In March 2014 the financing agreement for a grant of 3 million euros was signed by the Finance Ministry, BOL and KfW in order to establish the LAFF. The interest paid by ACLEDA to the LAFF will be used to increase the capital stock of the revolving fund. In addition, the programme will offer capacity building to selected partner banks in order to prepare these banks to qualify for loans from the LAFF. The Agricultural Promotion Bank and the Lao Development Bank will both engage in capacity building measures before receiving a loan from the LAFF.

The overall programme objective is to facilitate access to long-term finance through the domestic banking sector for households, micro, small and medium enterprises in rural areas. Eligible banks can access a refinancing facility and capacity building measures tailored to these businesses. The rationale for focusing on these entrepreneurs is the high impact on poverty alleviation through job creation and income generation.

The signing ceremony took place in the presence of representatives of the BOL, Finance Ministry, ACLEDA Bank Lao Ltd. and KfW. KfW is one of the world’s leading and most experienced promotional banks with a balance sheet total of 465 billion euros (more than LAK 4,500 trillion). Established in 1948 as a public law institution, KfW is owned 80 percent by the Federal Republic of Germany and 20 percent by the federal states.

It carries out Germany’s financial cooperation with developing countries on behalf of the Federal Government. Its goal is to combat poverty, secure peace, protect the environment and the climate, and make globalisation fair.