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Business credit tight despite banking sector growth
Business operators in Laos are struggling to access credit despite a rapid increase in the number of banks in Laos, according to a report from the International Finance Corporation (IFC) and World Bank.
The latest Doing Business report ranks Laos 166th out of 183 economies for credit availability this year, worse than the country's 155th place in the previous survey.
Laos has more than 20 commercial banks, at least 33 registered micro-finance institutions and a large amount of funding available through development funds and poverty reduction funds set up by mass organisations and civil society bodies.
The Bank of the Lao PDR encouraged the establishment of more banks and micro-finance institutions so people could more easily obtain the capital needed to set up new businesses and expand existing ones, thereby creating jobs and boosting incomes.
According to the report, the Lao government will need to revise regulations to make starting a business easier, after the ranking for ease of business start-up dropped from 88th last year to 89th this year.
Other issues the government needs to address are the difficulty in obtaining a construction permit after Laos' ranking fell two places from 78th to 80th, and the complexity of the tax system after Laos dropped from 122nd to 123rd this year.
The enforcing contracts category ranking also lost ground, with Laos slipping from 109th to 110th place.
Despite setbacks in Laos' ranking for some indicators, the country has seen improvement in other areas such as access to electricity, in which Laos rose to 138th place from 139th, and cross border trade, in which Laos jumped two places from 170th to 168th this year.
However, Laos' rankings for registering poverty, protecting investors and resolving insolvency have remained unchanged from last year's survey.
The overall Doing Business ranking of Laos this year saw the nation drop two positions from 163rd to 165th out of 183 economies.
Despite having enacted a number of legal changes to facilitate investment and ease of doing business, one of the major challenges for Laos is the enforcement of investment laws and regulations. This is posing problems for business operators in Laos, according to IFC officials.
Laos has attracted a large amount of foreign investment over the past five years but this has been concentrated in the resource sector, which will eventually be exhausted.
Investment in the processing industry and small and medium size enterprises is still limited, which is considered an indicator of an unattractive investment climate.
In addition, Laos faces a shortage of skilled workers, which the government is trying to remedy by training workers to meet the needs of projects funded through foreign investment.
vientiane times
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