The development of a large, competitive and innovative SMEs sector is one of the key elements of Lao PDR’s long-term development strategy. As in other countries in the world, SMEs create most of the private sector jobs in the economy and are a critical element for poverty alleviation and shared prosperity. Despite impressive macroeconomic performance in the past years, most firms in Lao PDR still remain small.
The Government of Lao PDR has received funding from the World Bank Group for the Small and Medium Enterprises Access to Finance Project. The objective of the Project is to provide long-term funding sources for commercial banks to provide long-term credit to small and medium enterprises (SMEs). This will be achieved by increasing the supply of long-term finance provided by commercial banks and by strengthening the capability of Department of SME Promotion, within the Ministry of Industry and Commerce to formulate and implement public policies that promote access to finance for SMEs.
The assignment is to deliver customized SME lending training modules and train the commercial banks (with priority given to the Participating Financial Institutions (PFIs) under the Line of Credit) to meet the following objectives:
- Enhance capacity of commercial banks in Lao PDR particularly the PFIs in providing loan to the SME sector
- Improve knowledge of commercial banks’ managers and credit officers on the dynamic of SME market and ability to identify new-market development
- Improve staff capabilities and technical skill in processing SME loans
- Strengthen credit risk management by improving skill in identifying inherent risk of SME loan and promoting the use of risk mitigation tools
- Improve monitoring and managing SME customers and SME loan portfolio
- Develop a strong base of local/national expertise to take over the capacity building programs for PFIs and other banks to directly conduct and replicate training programs on a sustained basis
- Review existing credit analysis and approval procedures of PFIs
- Review the existing portfolio and risk management strategies, policies, procedures and risk assessment methodologies of PFIs
- Review all central bank regulations concerning credit risk assessments in light of its impacts on the PFIs
- Review the last management letters of PFIs associated with the annual external audits of financial statements and the recent on-site central bank inspection reports, paying particular attention to the shortcomings identified by these examiners with respect to risk management
- Review the existing financial products utilized by the PFIs for lending to SMEs
- Recommend new and relevant financial products that are utilized by SMEs in developing countries that would be applicable to banking sector in Laos
- Provide training to management and loan officers of the PFIs and other banks in the revised credit analysis and risk management strategies and procedures. Loan officer training will cover the following topics:(i) SMEs credit analysis; (ii) loans/leases; (iii) portfolio monitoring; (iv) managing a growing loan/lease portfolio; and (v) loan workout/recovery
- Provide hands-on training to the assigned staff of the LBA to enhance their capacity in order for them to provide TA to PFI’s in the future.