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Good practice Imported

Lao PDR SME Access to Finance Project — World Bank Credit Line and Risk-Sharing Facility for Bank SME Lending

Laos · Vientiane · See the Laos profile · See the Vientiane profile

Evidence: Observational / pre–post Top 89% 48/100 · Ask Evidence Copilot about this practice

A $20m World Bank IDA credit line and risk-sharing facility routed long-term loans to Lao SMEs through three commercial banks; by mid-2017 only 42 SMEs had drawn $4.4m, with the Bank's own review citing slow first-year implementation.

20 US$ million
Total project financing (IDA credit + grant)
42
SMEs approved for sub-loans (as of 30 June 2017)
4.4 US$ million
Total value of approved sub-loans (as of 30 June 2017)
<20 %
Share of Lao SMEs able to access long-term loans before the project
21 %
Female beneficiaries share (vs 20% target) (as of 30 June 2017)
30
DOSMEP staff trained (vs target of 20)
430+
Officials and stakeholders trained overall (2015-2017)
9 loans totalling 11bn+ kip (approx. US$1.35 million)
LCNB SME loans approved by December 2016 (by Dec 2016)
Lao PDR SME Access to Finance Project — World Bank Credit Line and Risk-Sharing Facility for Bank SME Lending

Details

Promoter
Department for Small and Medium Enterprise Promotion (DOSMEP), Government of Laos, with World Bank/IDA financing
Period
2014–2020
Keywords
SME finance, credit access, risk-sharing facility, bank capacity building

Context

The Lao PDR SME Access to Finance Project (P131201) combined a US$10 million IDA credit and a US$10 million IDA grant, structured as a US$15 million line of credit plus US$5 million in technical assistance, to help Lao commercial banks extend long-term financing to SMEs that otherwise struggled to access credit — at approval, fewer than 20% of Lao SMEs could obtain long-term loans.

Objectives

Ease collateral constraints for SME lending via a risk-sharing facility routed through participating banks, and strengthen the Department for Small and Medium Enterprise Promotion's (DOSMEP) SME policy capacity through technical assistance.

Activities

The project ran from September 2014 to mid-2020 (later extended, with a related emergency-support project following), channelling funds through three participating banks (ST Bank, LCN Bank and Sacom Bank) under the risk-sharing facility, alongside technical assistance and staff training for DOSMEP.

Results

The World Bank's own mid-term review (as of 30 June 2017) recorded 42 SMEs approved for US$4.4 million in sub-loans across the three participating banks, with 21% of beneficiaries female — exceeding the project's 20% target — and zero non-performing loans reported at that point. Separately, Lao-China Nanyue Bank (LCNB) reported to Chinese state media that it had approved nine SME loans totalling over 11 billion kip (about US$1.35 million) by December 2016. On the capacity-building side, 30 DOSMEP staff were trained against a target of 20, and more than 430 officials and stakeholders took part in related training between 2015 and 2017.

Conclusions

The Bank's own mid-term documentation is candid that the project's first year was slow due to limited implementing-agency capacity and delays selecting participating banks, and a separate World Bank Group evaluation of SME lines of credit generally notes a lack of evidence that this instrument reliably benefits SMEs — a caution that applies directly to this project's modest reach of 42 firms against a national SME financing gap.

Implementation
Indicative cost
Medium (€50k–€500k) — US$10 million IDA credit plus US$10 million IDA grant = US$20 million total, structured as a US$15 million line of credit plus US$5 million in technical assistance.
Time to results
Long (> 3 years) — Ran from September 2014 to mid-2020 (extended), with a related emergency-support project following; mid-term review conducted as of 30 June 2017.
Staffing & skills
Department for Small and Medium Enterprise Promotion (DOSMEP), Government of Laos — implementing agency, Three participating commercial banks: ST Bank, LCN Bank and Sacom Bank

Conditions for success

  • Adequate implementing-agency capacity and timely selection of participating banks
  • A risk-sharing facility structure to ease collateral constraints for SME borrowers
  • A dedicated technical-assistance budget (US$5 million) to build DOSMEP's policy capacity

Common failure modes

  • The project's first year was slow due to limited implementing-agency capacity and delays selecting participating banks
  • A separate World Bank Group evaluation of SME lines of credit generally finds a lack of evidence that the instrument reliably benefits SMEs
  • Reach remained modest (42 firms) against a national SME financing gap where under 20% of SMEs could access long-term credit

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