Apex to lend against farm permits

Myanmar Apex Bank will begin allowing farmers to access bank loans by using their work permit certificates as collateral, according to bank chair U Chit Khine.

The Form-7 certificates were created with the 2012 Farm Land Law, functioning as a farmland work permit certificate for people with the right to farm a particular plot of land.

Apex will now offer three-year loans to farmers of K400,000 per acre using the certificates as collateral, U Chit Khine said at a ceremony held in Danubyu township of Ayeyarwady Region.

“We haven’t seen enough support to the agricultural sector to develop. That’s why we’re launching this system,” he said.

“It should become widely adopted, but we’ve launched it in Danubyu first, as a test.”

U Chit Khine is not only the chair of Myanmar Apex Bank but also head of local conglomerate Eden Group, with businesses in the agriculture industry.

The program is started lending against the Form-7 of 275 farmers in Danubyu township, with total value of K596 million (US$542,000). Interest rates are 13 percent a year, the maximum allowed by law.

U Chit Khine said Apex is the first bank to lend against Form-7. Land titles is by far the preferred method of collateral for domestic banks, accounting for over 90pc of lending.

Apex will try not to take possession of the right to work the farmland if a farmer has trouble with his or her debt, he said. Land that is seized due to non-payment will be sold to other farmers.

“Farmland should be in the hand of farmers. That’s why we plan to adopt a system where default farmers’ land is sold at auction to other small farmers, who can continue their business,” said U Chit Khine.

Agriculture experts say there is a significant need for capital in the sector, though some question on what scale the program can be implemented.

“The need for capital is the main challenge for paddy farmers,” said U Ye Min Aung, general secretary of the Myanmar Rice Federation. “It is a good thing to allow farmers to access loans by using their certificate. But I don’t think Apex can do this for the whole country.”

U Ye Min Aung said more banks and financial institutions need to be encouraged to lend to farmers, which will strengthen the sector.

Myanmar farmers generally use the cheapest techniques, often skimping on inputs like fertiliser and insecticide that would improve yields. Still, it generally costs K80,000 to K100,000 an acre for the difference costs, including to hire labourers.

“The number of workers for planting and harvesting paddy is growing scarce, so we have to hire machines,” said U Thein Win, a farmer from Hti Kway village in Danubyu. “Costs are going higher – thank god we are getting a better price for paddy these days.”

U Thein Win, who farms on 15 acres, said he is keen on Apex’s loans partly due to their long, three-year term. He added that the market price for 100 baskets of paddy is K300,000 to K350,000, while an acre’s lowest yield is about 60 baskets.

While farmers like U Thein Win are keen to try out the loans, their reach is limited. Only a few farmers in one of the 26 townships in Ayeyarwady Region can access the program, though it may do something to restart Myanmar’s rice bowl.

Source: Myanmar Times

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