Challenge
Small businesses, including businesses in the agriculture sector, account for the majority of GDP in Lao PDR and employ more than 70 percent of all workers in the country. But these businesses that are so central to the economy have traditionally been unable to access financing at reasonable interest rates. After a period of high inflation combined with stagnant wages, the country is now seeing an exodus of workers that threatens the stability of food production.
Solution and Impact
In a landmark investment, DFC, in collaboration with USAID/Lao PDR, committed a $4 million loan portfolio guaranty to Phongsavank Bank for on-lending to small and medium-sized businesses in rural parts of the country, including many in the agriculture sector.
The guaranty, which represents DFC’s first-ever financing in the country, will expand a Phongsavank program known as the Village Fund that provides loans along with agricultural equipment and other inputs to rural farmers. With an expected average loan size of $3,000, the guaranty will focus on low-income communities and borrowers that have traditionally lacked the collateral required for bank loans.
This project was profiled in 2024.