Bank of Lao PDR Greenlights Establishment of Credit Guarantee Companies

On October 31, 2024, The Bank of Lao PDR issued a significant decision, No. 1179/BOL, paving the way for the establishment of credit guarantee companies in Laos.

Key Provisions of the Decision:

The decision outlines a comprehensive framework for setting up credit guarantee companies, including:

• Procedural Guidelines: Detailed steps and requirements for establishing such companies.

• Organizational Structure: Fundamental components and organizational structure necessary for these companies.

• Business Scope: Types of credit guarantee businesses that can be undertaken.

• Guarantee Mechanisms: Procedures for providing guarantees, maintaining stability, and ensuring financial soundness.

• Accounting, Reporting, and Inspection: Standards and regulations for accounting, reporting, and inspections.

• Dissolution and Bankruptcy: Procedures for dissolution and bankruptcy of credit guarantee companies.

• Prohibitions: Restrictions and prohibitions to maintain the integrity of the credit guarantee system.

This decision marks a significant step towards strengthening the financial sector in Laos, particularly by facilitating access to credit for small and medium-sized enterprises (SMEs). Credit guarantee companies play a crucial role in mitigating risks associated with lending to SMEs, thereby encouraging lending institutions to extend credit to a wider range of borrowers.

By providing this comprehensive regulatory framework, The Bank of Lao PDR aims to foster a robust credit guarantee industry that can contribute to the sustainable economic growth of the country.