MICROCAPITAL BRIEF: World Bank Group to Provide Funding of $42m to Lao People’s Democratic Republic to Support Small and Medium-Sized Enterprises (SMEs), Hydropower and Mining Sectors

The World Bank Group (WBG), a group of five multilateral organizations that invest in developing countries, recently approved plans to disburse a total of USD 42 million to support the development of small and medium-sized enterprises (SMEs) and the hydropower and mining sectors of the Lao People’s Democratic Republic (Lao PDR).

The International Development Association (IDA), the development agency of WBG that offers grants and interest-free credit to 82 of the world’s poorest countries, is planning to disburse a grant of USD 10 million and a loan of the same amount to the government of Lao PDR to support its “Small and Medium Enterprise Access to Finance Project”[1]. Additionally, the International Finance Corporation (IFC), the private investment arm of WBG, has announced that it will support the project with an investment of USD 4 million in “risk sharing funds”[1]. It is expected that the project will provide long-term credit to SMEs and contribute to job creation in the country.

WBG approved additional funding of USD 17.8 million for the “Technical Assistance for Capacity Building in Hydropower and Mining Sectors Project”[1] of Lao PDR. The aim of the funding is to “help improve effectiveness of government institutions and build capacity in these sectors”[2].

Mr Ulrich Zachau, WBG’s Country Director for Southeast Asia, stated that “financing for small firms is vital for the Lao economy. It will help create more jobs, increase family incomes and reduce poverty. Equally important will be the sustainable use of Lao PDR’s wealth of hydropower and mining resources”[1]. Her Excellency Ms Thipphakone Chanthavongsa, Vice Minister of Finance of Lao PDR, added that “the two projects will contribute to the socioeconomic development and environmental sustainability of Lao PDR”[1].

The current financing package of USD 42 million supplements a grant of USD 8 million approved by WBG in 2010 and a grant of USD 2.54 million provided by the Australian Department of Foreign Affairs and Trade. WBG had commitments of USD 52.6 billion in loans, grants, equity investments and guarantees in approximately 196 countries and territories as of December 2013.

By Alíz Crowley, Research Associate

About The World Bank Group (WBG)

Headquartered in the US, the World Bank Group (WBG) is a multilateral development organization that aims to improve living standards for people in developing countries. As of 2014, WBG encompasses the International Bank for Reconstruction and Development (IBRD), owned by 188 member nations; the International Development Association (IDA); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID). WBG has 10,000 employees and operations in approximately 120 countries as of 2014. WBG had commitments of USD 52.6 billion in loans, grants, equity investments and guarantees as of December 2013.

Sources and Additional Resources

[1] World Bank Group Press Release, Small Firms, Hydropower and Mining Sectors in Lao PDR to Benefit from New World Bank Group Financing

[2] Microfinance Focus, Laos and World Bank Sign Agreement to Finance SMEs

MicroCapital, August 16, 2014, World Bank Group Donating $22m to, Investing $2m in Agriculture Commercialization in Tajikistan

MicroCapital, July 27, 2014, Absolute Portfolio Management’s Vision Microfinance Funds Loan $14m to Microfinance Institutions (MFIs) in Armenia, China, India, Peru, Tajikistan

MicroCapital, July 25, 2014, World Bank Group (WBG) Loans $12m, Donates $12m to Government of Mozambique for Financial Sector Reform, Including to Boost Financial Inclusion

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