19 Nov Summary Introduction “Lao Access to Finance Fund”
- 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).
- 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).
- 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)
- 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.