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Secured Transactions Law
Secured lending is an essential element of an effective market economy. By reducing the risk to the lender, it allows a business or a person to borrow more funds at lower cost. A modern secured lending environment also allows a business or person to borrow, but keep possession of their assets, thus increasing liquidity.
A number of elements make up an effective secured lending environment. The lack of any one element will impair the entire system. There must, of course, be the proper legal framework, allowing the taking of secured interests and their registration with a State-sanctioned authority. An effective registration system in turn requires a functioning registry. Finally, should the debtor default, resulting in a need to exercise the creditor’s rights, there must be effective enforcement.
None of these elements are present in Laos. The legal framework is flawed. The registry does not yet exist. And ineffective enforcement, endemic in the entire legal system, negatively impacts the growth of lending as well as development of the economy in general.
As a result, there is almost no secured lending in Laos. A few lenders are willing to take security interests in vehicles, and there is some consumer credit for household goods in Vientiane. Otherwise, banks actively avoid taking security interests in movable assets.
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