With the Lao economy projected to see moderate growth this year, the banking sector continues to be an important driver in boosting growth.
In its latest report, the Centre for Macroeconomic Policy Research and Economic Restructuring (CMPRER) under the National Institute for Economic Research projects that the macro-economy will improve moderately in 2020, with growth of 6.3 to 6.4 percent.
This projection is slightly lower than the growth target of 6.5 percent set for Gross Domestic Product (GDP) in the 2020 socio-economic development plan.
The Xayaboury hydropower plant, which became operational in December, is another key driver of economic growth, according to the Assessment Report on Macroeconomic Performance in Laos released last month.
In addition, the sale of electricity generated by other hydropower plants also supports economic growth.
The other main players driving the economy are small and medium-sized enterprises (SMEs) and agriculture, the reported noted.
However, the Lao economy is also facing challenges. Extreme weather events in 2019 and low river levels posed a significant threat to agriculture in 2019 and will continue to affect electricity generation in the first five months of 2020.
With projected moderate growth, the banking sector significantly supports the key economic drivers, including SMEs.
Investment in the economy by the financial sector is expected to be as high as 10,500 billion kip (more than US$1.18 billion), representing 22.58 percent of total investment and 5.9 percent of GDP, according to the socio-economic development plan.
In this regard, many commercial banks in Laos have been active in supporting the country’s economic growth and their contributions have been recognised locally and internationally.
These include Sacombank Lao, whose director Pham Quang Phu was awarded Best Banking CEO Lao 2019 by the Global Banking and Finance Review -- a leading online and print magazine based in the United Kingdom.
Five other firms operating in Laos were also given awards by the magazine such as Allianz General Laos Ernst & Young Laos, The Joint Development Bank, Lao China Bank and Phongsavanh Bank.
Granted the award, Mr Pham Quang Phu said “It’s my honour to have received this award. It’s a prize for all executives and staff (of the bank) for their dedicated and hard work to deliver international standard services to our partners and customers.â€
“We would like to become a hub to provide financial solutions to SMEs to firmly drive the momentum of the Lao economy.â€
Making finance accessible to SMEs is essential for them to grow their businesses and drive the economy, as SMEs are a vital segment of the country’s economy.
SMEs account for about 99 percent of all registered firms in Laos, according to World Bank.
The 2013 Economic Census conducted by the Lao Statistics Bureau recored that SMEs accounted for 82 percent of total employment.
Under Mr Pham Quang Phu’s leadership, Sacombank Lao has been recognized as a reliable finance provider to Lao and Vietnamese businesses, especially SMEs.
Sacombank Lao has strived to be at the forefront of retail banking sector in Laos. It has employed qualified staff to provide quality services that meet the demand of corporate clients and personal customers.
The banking system plays a significant role in economic development, attracting individual savings and giving out to businesses and manufacturers which facilitate trade. With the loan from banks, manufacturers can purchase raw materials and expend on other costs. Likewise, it is safe to have individual saving deposited in banks where interest is also generated.