MICRO, SMALL & MEDIUM-SIZED ENTERPRISE FINANCING GUARANTEE SCHEME (MFGS)

Credit Guarantee Process

The guarantee process can only begin once the bank (lender) has considered approving the initial credit. This is to ensure that the decision-making and control of the credit remains with the lender.

Step Description
Step 1 Loan Application The Entrepreneur (SME) prepares documents and a business plan to apply for a loan directly with a Partner Financial Institution (PFI).
Step 2 Bank Evaluation and Approval The PFI analyzes the business feasibility and considers approving the loan (BANK LOAN approved) according to the bank's conditions.
Step 3 Guarantee Request Once the loan is approved, if additional collateral is required, the PFI submits a guarantee application form to LCGC.
Step 4 Issuance of Guarantee Certificate LCGC evaluates the application. Upon approval, LCGC issues a Guarantee Certificate and sends it back to the PFI.
Step 5 Loan Disbursement Upon receiving the Guarantee Certificate from LCGC, the PFI proceeds to disburse the loan to the Entrepreneur (SME) for business use.
No Eligible Criteria
* Classified as an MSME under Decree 04/GOL
* Legally registered and operating in Lao PDR (formal registration or local authority licence)
* Majority Laotian-owned business
* Business operated in Lao PDR
* In operation for at least 2 years
* Good loan repayment records in the last 1 year (NPL records resolved with 1-year cooling-off period)
* Has the repayment capacity for the loan
* Not blacklisted or under any applicable sanctions list
* Business activities not listed in the Negative List
* Any relationship with key personnel of the PFI or LCGC must be disclosed

THE MSME FINANCING GUARANTEE SCHEME

Guarantee Coverage
  • Secured Guarantee: 80% of principal
  • Unsecured Guarantee: 70% of principal
  • Priority Sectors: 80% (Secured & Unsecured)
  • Covers principal ONLY — excludes interest & fees
Loan Parameters
  • Minimum loan: LAK 100 million
  • Maximum loan: LAK 4 billion
  • Purpose: Working capital or Capital expenditure
  • Asset financing margin: < 85%
Guarantee Tenure
  • Minimum: 1 year
  • Maximum: 7 years
  • For loans > 7 years: coverage capped at 7 years
  • Start & expiry dates stated in Guarantee Certificate
Loan Types Covered
  • Term Loans
  • Overdrafts
  • Revolving Facilities (incl. trade finance, invoice financing, receivables financing)

TYPE OF GUARANTEE & FEE

Facility Fee (One-Time, Paid by PFI)

Approved Facility Size
One-Time Facility Fee
< LAK 30 Billion
1.00%
LAK 30 Billion — < LAK 100 Billion
0.75%
LAK 100 Billion and above
0.50%
Secured Guarantee
A Secured Guarantee is issued for loans where the borrower has pledged real property (land and/or building) with a formal land title as collateral. The recognised collateral value is 80% of the PFI's approved valuation. LCGC covers 80% of the principal loan amount, with the PFI retaining 20% of the risk.
Guarantee Cover 80%
Guarantee Fee 1.0% p.a.
Min. Loan LAK 100M
Max. Loan LAK 4B
Tenure 1-7 Yrs
Purpose WC / CapEx
Unsecured Guarantee
An Unsecured Guarantee supports loans where the borrower has no qualifying collateral. The guarantee acts as a substitute collateral, covering 70% of the principal. This product is particularly valuable for new or asset-light MSMEs with strong business fundamentals but limited property ownership.
Guarantee Cover 70%
Guarantee Fee 1.5% p.a.
Min. Loan LAK 100M
Max. Loan LAK 4B
Tenure 1-7 Yrs
Purpose WC / CapEx
Priority Sector
LCGC's Priority Sectors include: (1) Manufacturing including agricultural processing, handicraft and livestock; (2) Wholesale trading of agricultural products for processing or export; and (3) Tourism services. Priority Sector loans receive 80% coverage and a 1.0% p.a. guarantee fee regardless of collateral status.
Guarantee Cover 80%
Guarantee Fee 1.0% p.a.
Min. Loan LAK 100M
Max. Loan LAK 4B
Tenure 1-7 Yrs
Purpose WC / CapEx

Eligible Loan & Facility Types

Loan / Facility Type
Description
Term Loans
Fixed-term business loans for working capital or capital expenditure with defined repayment schedules.
Overdrafts
Revolving credit lines allowing MSMEs to draw funds up to an agreed limit for day-to-day operational needs.
Trade Facilities
Letters of credit, trust receipts, and import financing for MSMEs engaged in trade.
Invoice Financing
Short-term financing secured against outstanding invoices, unlocking working capital tied up in receivables.
Receivables Financing
Broader receivables-backed facilities supporting MSMEs in managing cash flow gaps between delivery and payment.

Value-Added Services

Beyond guarantee products, LCGC provides the following services to partner financial institutions and MSME:
  • Credit Guarantee Training Program for credit officers of partner banks to evaluate and structure loans to be guaranteed, application for credit guarantee and monthly reporting and monitoring on status of guaranteed loans.
  • MSME Capacity Building Improve Financial literacy of MSME with structured training programs on credit guarantee, cashflow management, entrepreneurship, Marketing and accounting system.
  • Guarantee Certificate Issuance Within 5 business days of a complete and accurate application.
  • Claims Processing Structured two-stage framework with transparent timelines and payout procedures.
  • Scheme Updates & Policy Notifications Written updates on changes to the Negative List, fees, or scheme parameters.

NEGATIVE LIST — INELIGIBLE ACTIVITIES

The following activities and sectors are excluded from LCGC guarantee eligibility:
  • Production or trade in any product deemed illegal under Lao PDR law or international conventions
  • Production or trade in weapons, munitions, and arms-related activities
  • Production or trade in tobacco products
  • Gambling, casinos, and equivalent enterprises
  • Production or trade in radioactive materials (with limited exceptions for medical/measurement equipment)
  • Production or trade in unbonded asbestos fibres
  • Plantation projects requiring removal of non-degraded natural forest or protected areas
  • Activities adversely affecting sites of cultural or archaeological significance
  • Transboundary trade in waste or waste products (except non-hazardous waste for recycling)
  • Trade in goods without required export/import licences
  • Drug trafficking and human trafficking
  • Any criminal or outlawed activities
  • Any business prohibited by Lao PDR laws and regulations
  • Terrorism and money laundering activities
  • Companies involved in child labour
  • Companies linked to tax evasion
Maximum Guarantee Exposure per MSME
LAK 5,000,000,000 (LAK 5 Billion)
Aggregated across the borrower and key owner(s). Additional guarantees allowed > 6 months after last certificate, if existing loans are in good standing.

ELIGIBLE & PRIORITY SECTORS

Eligible Sectors
Agriculture
Trade
Services
Handicraft
Industry
Priority Sectors (Enhanced Benefits)
The following sectors are eligible for 80% guarantee coverage and a reduced 1.0% annual guarantee fee, regardless of whether the loan is secured or unsecured:
Manufacturing Including agricultural processing, handicrafts, and livestock production.
Wholesale Trading Specifically for agricultural products intended for further processing or export.
Tourism Services All services related to the tourism and hospitality sector in Lao PDR.

HOW THE SCHEME WORKS (all)

How the Scheme Works
1
MSME Applies

Borrower approaches PFI for a business loan

2
PFI Assesses

PFI performs credit evaluation of the borrower

3
Guarantee Applied

PFI submits Guarantee Application to LCGC

4
LCGC Reviews

LCGC checks compliance with MFGS criteria (5 business days)

5
Certificate Issued

LCGC issues Guarantee Certificate to PFI

6
Loan Disbursed

PFI disburses the loan to the MSME borrower