Lack of financial evidence hampers SME loans

Myanmar’s banks are facing difficulties in offering loans to small- and medium-sized enterprises (SMEs) as the firms cannot submit their collateral and balance sheets, according to the Ministry of Industry.

The banks face a lack of evidence of collateral, receipt and payment accounts, balance sheets and cash flow records, and higher transition costs than commercial loan dealers, a seminar entitled “Fostering SME’s Development in Myanmar” heard.

Tun Win, an entrepreneur, said: “Some SMEs cannot show their collateral. It is impossible for banks to disburse loans to SMEs without it. Our major difficulty is that SMEs have no capital even though we have an idea of how to start a business.”

Myanmar Insurance is selling credit guarantee insurance to SMEs to enable firms to take out loans but it has yet to sell any because banks cannot offer loans without collateral.

Currently, the government disburses loans to SMEs via the Myanmar Economic Bank and SMEs Development Bank. Those who want to take out SME loans have to apply to the Directorate of Industrial Supervision and Inspection.

The Small and Medium Industrial Development Bank offers loans to SMEs at the rate of 8.5 percent. And loans of up to Ks 100 million are available based on the value of collateral, with a three-year repayment period.

According to the Ministry of Industry, there are more than 120,000 SMEs across the country, which account for 99 percent of the Myanmar economy.

Source: The Irrawaddy

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