CDB provides $300 million loan to the Bank of the Lao PDR for on-lending to small- and medium-sized enterprises

Project narrative

On November 13, 2017, the Bank of the Lao PDR (BOL) and China Development Bank (CDB) signed a financial cooperation agreement (MOU) to support the small- and medium-sized enterprises (SMEs) in Laos. Then, on July 10, 2019, the BOL and the CDB signed a $300 million loan agreement. The loan was scheduled for disbursement in three separate $100 million tranches. The proceeds of the loan were to be used by the borrower to on-lend to 12 commercial banks, which will in turn on-lend to SMEs in Laos (with special emphasis on those SMEs that are engaged in agricultural production and supply regional markets). However, according to the World Bank, several ‘unrealistic conditions’ (related to SME eligibility and SME business plans) prevented a quick release of the first tranche of the loan. In December 2019, Governor of the BOL Sonexay Sithphaxay said that “[w]e are collecting information about the readiness of the banks involved in the initiative on SME funding before submitting a request to the CDB for the withdrawal of the first tranche of $100 million at the end of this year.’ Six months later, in June 2020, the World Bank reported that the BOL was seeking to renegotiate its loan agreement with CDB.