The Laotian agribusiness sector is dominated by family-owned small and medium enterprises (SMEs), which are severely constrained in their growth by a lack of access to affordable credit. The financial sector in turn is reluctant to lend to agribusiness perceiving this sector as highly risky. Through the interventions of the Project, the risk averseness of the financial sector will progressively lower and the access to credit in the target provinces of Laos will gradually improve.
Moreover, the focused promotion of climate-friendly investments will modernize the target value chains and increase their competitiveness eventually benefiting the target beneficiaries – smallholder farmers. Focus on environmentally sustainable technologies will contribute to a gradual shift towards climate-friendly technologies in the agricultural sector.
Within this overall ADB project setup, AFC together with ADG and our local partner Enterprise & Development Consultants (EDC) have been selected by the Asian Development Bank (ADB) to provide technical assistance over the project period until January 2023.
We will provide financial support and TA by combining the following approaches:
- Direct financial and technical support to the agricultural sector in form of grants and TA for selected value chains (rice, vegetables and bio fertilizers); and
- Strengthening the capacities of the financial sector in agricultural lending.
Under the first approach, a matching grant scheme (MGS) will be set up. Up to 60% of the investment costs will be channelled to eligible SMEs and agricultural production groups (APGs). In parallel, training in financial management and technical support will be given to promising applicants. Training and coaching will improve the capacities of the target group in financial management and will help to prepare sound business plans for climate-friendly investments.
Apart from the finance and TA provided, an awareness raising and capacity building program will be provided for the Laotian financial sector. The objective of this part of the project is to enhance the access to finance for agribusiness enterprises and to reduce the risk aversion of commercial banks to finance agribusiness sector, and to reduce climate change risk to crop production through promoting crop insurance.
While the inception workshop was held in February 2020, subsequently all activities were put on hold due to the current COVID-19 crisis. Nevertheless, by having in place our local team of experts and using innovative digital means the project was still managing to continue with main parts of the inception phase together with the Project Executing Agency.
Since May, the Lao Government has slowly reopened the country, enabling our team to carefully conduct our first in country missions to the target provinces.