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TheInternational Finance Corporation(IFC)and Banque Franco-Lao(BFL) are partnering to expand access to credit for small and medium enterprises across the Lao PDR through a new risk-sharing facility to expand lending to smaller companies, which play a critical role in driving economic growth and job creation across the country.
Small and medium companies are the backbone of the Lao economy, accounting for 99% of all registered businesses and providing 94% of formal employment. However, access to finance remains a major challenge, with only 27% of these firms able to access bank credit. To narrow the financing gap and enable more lending to underserved businesses, under the new facility IFC and BFL will each contribute up to $5 million to share the credit risk on a $10 million loan portfolio for small companies.
IFC’s involvement lessens the risks that a commercial bank like BFL faces when operating in a challenging market environment, allowing it to safely expand financing to high-potential firms that drive the real economy, create jobs, and support inclusive growth across Laos.
IFC, the World Bank Group member focused on the private sector in emerging markets, is also providing technical assistance to help BFL strengthen environmental and social risk management practices and develop credit products for new market segments. Through this initiative, BFL aims to double itsbusiness withsmall and medium-sized enterprises by 2028, so supporting the growth of businesses and jobs nationwide.
The transaction comes under the IFC’s Small Loan Guarantee Program, which benefits from a pooled first-loss guarantee provided by the World Bank’s International Development Association Private Sector Window Blended Finance Facility. This helps de-risk and scale up financing for small and medium enterprises in fragile and low-income markets.
To help Laos unlock the potential of its private sector, the World Bank Group is working across sectors to build a resilient and supportive financial ecosystem. Projects funded by International Development Association credits are helping the country tap the private sector’s potential to expand job creation and become a more powerful engine of inclusive growth.
A recently completed World Bank project to enhance firm-level competitiveness and access to finance focused on removing the barriers that prevent businesses from growing, creating jobs, and connecting to regional and global markets.
The project has supported reforms to streamline the business environment, expanded access to finance through commercial banks, strengthened trade and export capacity, and helped companies build skills and capabilities. These all directly support the World Bank Group's broader priority of creating more and better jobs to strengthen economic and social stability, reduce migration, improve livelihoods, enhance resilience to economic, climate, and other shocks, and move people away from poverty. A landmark achievement is the establishment of the Lao Credit Guarantee Company, which like this latest IFC-BFL agreement, mobilizes private capital for businesses that would otherwise fall outside the risk appetite of commercial banks.