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Nayoby Bank keeps interest rates level
State owned Nayoby Bank has kept loan interest rates unchanged despite a rise in the policy interest rate set by the Bank of the Lao PDR in a bid to curb inflation.
Nayoby Bank Director General Mr Bualong Xayavong said on Wednesday that loan interest rates remained unchanged at 7 percent for one year loans, 8 percent for one to three years loans and 10 percent for loans over three years, despite the central bank raising the policy interest rate from 10 percent to 12.5 percent in September last year.
“The government has not made any change to our interest rate,” he said amid concern that the central bank would put strong pressure on Nayoby Bank to increase interest rates, as the bank is largely dependent on lending from the central bank.
Nayoby Bank has received low interest loans worth 1,181 billion kip from the central bank since it was established in 2007. The bank has released about 885 billion kip in loans to business people and farmers, particularly those located in 47 poor districts around the country.
The bank expected to receive additional funds invested by government, international development partners and civil society but it has not. The bank does not take deposits from the public.
The central bank's decision to increase the interest rate is part of an effort to combat growing inflation in Laos.
“If there are two people raising chickens and 100 people buying them, the price of chicken will rise while if there are 100 people raising chickens and only two people buying, the price will drop,” Mr Bualong said, adding that higher interest rates would encourage people to deposit money at commercial banks.
“Lower levels of money circulation will curb inflation downward.”
Inflation in Laos has seen a rapid increase since the end of last year driven by rising costs of food, fuel and jewellery. Shortages of rice and agricultural products in Laos have contributed after large areas of agricultural land were damaged last year by flooding and drought.
Commercial banks in Laos have increased savings interest rates to mobilise investment funding in response to higher costs of capital from the central bank.
Mr Bualong said Nayoby Bank expects to mobilise 1,819 billion kip, enabling it to issue loans to farmers in poor villages around the country.
To reach the targeted amount, the bank will hold discussions with government, international donors and civil society in a bid to raise funds.
Investors including government and international donors would not lose their deposits if Nayoby Bank were selected to manage poverty reduction funds, Mr Bualong said. He explained the bank has reliable systems in place to provide loans to low wage earners and to recoup those loans with interest. Mr Bualong said that at present, a number of government agencies are managing government poverty reduction funds despite a lack of experience in loaning to farmers.
vientiane times
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