Poor Record Keeping Hurts SMEs’ Chances of Getting Loans

Local small and medium enterprises are having difficulties getting loans as they cannot provide adequate data about their business, said Yangon Chief Minister U Phyo Min Thein at a December 8 monthly meeting between business leaders and the Vice President of Myanmar.

Most SMEs are not registered and do not keep records of tax payments and annual profit and losses.

“While surveying the conditions of SMEs, we found that only a few could provide complete statistics,” said the chief minister. “Financial Institutions have enough cash but borrowers cannot provide all the necessary documents, so loans cannot be granted.”

To tackle this issue, the Yangon Regional Government is planning to ask the Japan International Cooperation Agency (JICA), the largest provider of loans to Myanmar SMEs, to relax its credit requirements. SMEs have different credit needs; some need loans to purchase machineries while others borrow to fund their operations.

Currently, the Union and regional governments are working on a masterplan to provide SME loans through SME agencies.

U Phyo Min Thein pointed out that SMEs should transform their business model from an informal, family-run business to a formal one.

“[SMEs] always complain about not getting loans, but the reason they can’t get loans is actually because they cannot provide sufficient documentation to meet the requirements set by JICA,” said U Zaw Min Win, president of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI). “SMEs are very important for the development of the country.”

To be eligible for SME loans, applicants must be between the ages of 20 and 60 and their business must have a track record of at least two years.
The government has provided K30 billion in collateral loans and K7.393 billion in credit guarantee insurance (CGI) loans to SMEs while JICA has provided an additional 20 billion yen; the Myanma Economic Zone, K200 billion; and the German Corporation of International Cooperation (GIZ), 15.3 million euros.

Currently, there are 73,000 registered SMEs in Myanmar, but the total number of SMEs nationwide is believed to be much higher.

Source; Myanmar Business Today

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