fbpx 48161-001: Strengthening Access to Finance for Micro, Small, and Medium-Sized Enterprises | Asian Development Bank

Lao People's Democratic Republic: Strengthening Access to Finance for Micro, Small, and Medium-Sized Enterprises

Sovereign (Public) Project | 48161-001 Status: Closed

The TA aims to strengthen access to finance in Lao PDR for MSMEs by addressing supply and demand side constraints as measured by the percentage increase in MSMEs in target sectors using bank or MFI loans as a source of external finance. The outcome of the TA will be strengthened capacity of MSMEs to access formal finance for working capital. This will be achieved through first, a needs assessment of barriers in identified subsectors (with selection of one subsector), capacity development of MSMEs through offering of business development services (management skills development, business plan development, and financial literacy) and awareness raising around existing financial service providers/funds present in the respective market. To increase capital availability, the TA will promote the newly launched collateral registry and provide technical assistance around development of new products and services utilizing the registry .

Project Details

Project Officer
Hattel, Kelly L. Southeast Asia Department Request for information
Country
  • Lao People's Democratic Republic
Modality
  • Technical Assistance
Sector
  • Finance
 
Project Name Strengthening Access to Finance for Micro, Small, and Medium-Sized Enterprises
Project Number 48161-001
Country Lao People's Democratic Republic
Project Status Closed
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 8848-LAO: Strengthening Access to Finance for Micro, Small and Medium-Sized Enterprises
Japan Fund for Poverty Reduction US$ 1.50 million
Strategic Agendas Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Partnerships
Private sector development
Sector / Subsector

Finance / Finance sector development

Gender Equity and Mainstreaming Gender equity
Description The TA aims to strengthen access to finance in Lao PDR for MSMEs by addressing supply and demand side constraints as measured by the percentage increase in MSMEs in target sectors using bank or MFI loans as a source of external finance. The outcome of the TA will be strengthened capacity of MSMEs to access formal finance for working capital. This will be achieved through first, a needs assessment of barriers in identified subsectors (with selection of one subsector), capacity development of MSMEs through offering of business development services (management skills development, business plan development, and financial literacy) and awareness raising around existing financial service providers/funds present in the respective market. To increase capital availability, the TA will promote the newly launched collateral registry and provide technical assistance around development of new products and services utilizing the registry . In addition, the TA will conduct an impact assessment of and promote improved financial management of an existing SME Fund managed by the Department of Small and Medium Enterprise Promotion (DOSMEP). Finally, guidance will be provided to develop a pilot technology fund to provide technology upgrades to MSMEs in targeted sectors, while encouraging linkages to formal financial service providers.
Project Rationale and Linkage to Country/Regional Strategy In line with the government of Lao PDR's strategy to develop and promote small and medium-sized enterprises (SMEs) and undertake SME trade-related reforms to help achieve sustained and inclusive economic growth (a strategy embedded in the Seventh National Socio-Economic Development Plan (NSEDP7), 2011- 2015), ADB''s current Country Partnership Strategy (CPS) in Lao PDR has recognized the importance of strengthening the private sector. The private sector assessment under the CPS identified access to financial services as one of the key constraints faced by SMEs in expanding their businesses. In line with the CPS objective of promoting stronger private sector enabling environment, the envisaged CDTA therefore aims to support ongoing activities in the MSME sector. This CDTA will address recommendations from the previous lending program project completion report (PSME PCR) to strengthen access to finance through demand and supply side interventions, will complement the current SME Subprogram 2 Project Loan and may contribute to a future SME development program in targeted areas or a broader access to finance initiative.
Impact Higher income of MSMEs in the targeted subsector
Project Outcome
Description of Outcome Increased quality lending to MSMEs in targeted subsector
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

1. Strengthened capacity of MSMEs to access finance

2. Capacity development of MSMEs to develop practices necessary to improve access formal financial services

3. Increased knowledge among financial service providers of best practices in MSME product design and delivery including focus on particular needs of women-owned enterprises

4. Conduct impact assessment and promote sound financial management for the SME Fund

5. Framework for pilot technology fund to help MSMEs in target sectors

Status of Implementation Progress (Outputs, Activities, and Issues)

As of December 31, 2017:

Component 1 Strengthened capacity of MSMEs to access finance

Under this component, a training program including workshops and individual coaching was developed and implemented. The program also included an _interface_ session between financial service providers and MSMEs, i.e. banks and rice millers and other small enterprises mainly in the agribusiness fields. Government officials participated in all activities, and actively contributed to project M&E. The decision to make use of local service providers as trainers and build their capacity to deliver well-targeted and participatory training, rather than depending on project specialists, contributed to increased local capacity and, in turn, sustainability.

All in all, ten workshops (five in Khammouane and five in Savannakhet province) were held. In addition, 78 individual coaching sessions were provided. For each province, the program included one introductory workshop, three workshops on selected technical topics (business planning, accounting and marketing), and one MSME-financial institutions interface session.

In addition to the workshops, 78 visits or coaching sessions were held with 31 MSMEs between July and November 2017. "In Khammouane 15 MSMEs were visited more than 50 times by the national regional consultant who also assisted 10 MSMEs (7 women, 3 men) to submit applications to banks for new loans. In Savannakhet, 16 MSMEs were visited 26 times. Of the 12 bank loan applications (5 by women, 7 by men) submitted in Savannakhet, one was already approved by end of 2017. All loan applications were supported by business plans and accounting records developed within the framework of the project. Collateral (land certificate) and interest rates that are perceived as too high, remain key reasons for continuous limited access to finance for the MSMEs.

Component 2 Improved financial services available to MSMEs

Main achievements under this component relates to the SME Fund evaluation and the drafting of a framework for establishment of a Technology Fund.

Limited progress was made related to the Secured Transaction Registry or the introduction of new products by existing formal financial service providers.

Geographical Location
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation The following experts have been engaged under the TA: (i) Business Development Advisor/Team Leader, (ii) Product Design Advisor, (iii) M&E Specialist, (iv) Gender Specialist, (v) SME Policy Advisor, and national consultants for capacity building, M&E and business development.
Business Opportunities
Consulting Services

Individual experts to be recruited: (International Total = 22 person months and National Total = 44 person months)

1. International Business Development and Market Analyst Advisor (1) 10 person months

2. International SME Financial Product Design Advisor (1) 7 person months

3. International Monitoring and Evaluation Specialist (1) 3 person months

4. International Gender Specialist (1) 2 person months

5. National Business Advisory Specialist (2) 18 person months

7. National SME Financial Product Design Advisor (1) 4 person months

8. National Monitoring and Evaluation Specialist (1) 4 person months

Responsible ADB Officer Hattel, Kelly L.
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SERD
Executing Agencies
Department of Small & Medium Enterprise Promotion
Nong Bone Road, P.O. Box No. 474, 01005 Ban Fai Arie, Saysetha District, Vientiane Capital, Lao PDR
Timetable
Concept Clearance 05 Sep 2014
Fact Finding 09 Jun 2014 to 17 Jun 2014
MRM -
Approval 17 Dec 2014
Last Review Mission -
Last PDS Update 02 Apr 2018

TA 8848-LAO

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
17 Dec 2014 05 Mar 2015 05 Mar 2015 31 Dec 2016 31 Dec 2017 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
0.00 1,500,000.00 60,000.00 0.00 0.00 0.00 1,560,000.00 17 Dec 2014 604,888.31

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