Summary Introduction “Lao Access to Finance Fund”

19 Nov Summary Introduction “Lao Access to Finance Fund”

Posted at 02:50h in EOI_LAFF II, News by

1. Project

  • Bilateral German-Lao Development Cooperation.
  • 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.
Print page