Non-bank lenders asked to allow delayed repayments for struggling borrowers

Microfinance and other non-bank financial institutions have been instructed to provide repayment relief to their borrowers as most consist of low-income workers who could be hit by the economic fallout of COVID-19.

The Ministry of Planning and Finance’s Microfinance Business Supervisory Committee said on April 6 that neither principal nor interest should be collected “with force”.

Microfinance operators in Magwe, Sagaing and Mandalay, have already allowed repayments to be delayed since the end of March.

Over 80 microfinance organisations operate in Yangon Region but only around 10 of them have voluntarily extended repayments in light of the global pandemic. Most of the lenders have weekly repayment arrangements with borrowers. So far, repayments have been deferred for one month on average.

Pact, Dawn, BG, Brac, Vision Fund, BNK Cipital, Lolc, Unique, Quality, Microfinance Delta, ASA are among the microfinance institutions which have allowed their borrowers to defer repayments.

There are 190 organisations under the Committee and around 1.6 million members, mostly low-income families, have received financial services.

“There will be turmoil if repayments are recollected with force. So, lenders have to adopt a more sensitive approach during this time,” said Daw Phyu Yamin Myat, general secretary of the Myanmar Micro Finance Association (MMFA).

“If the members [borrowers] can’t repay right now, repayment dates should be deferred to a later date.”

Since COVID-19 first began spreading early this year, key manufacturing, agriculture and tourism industries in Myanmar have been severely hit by the pandemic. Factories have been forced to halt operations while farmers and fruit producers relying on the China market have suffered huge losses.

Many of the employees in these sectors draw the minimum wage or receive low incomes. But the economic fallout is being felt by other businesses too.

Since the beginning of March, private schools have had to give out refunds and some have even stopped operating as parents withdrew their kids from school.

“That is why we are facing problems paying back our lenders and despite our appeal letter, no agreement has been reached,” said a principal of a Yangon-based private school.

Daw May Myat Noe, who owns a small tailoring shop, said that business is “terrible” but that she is still being pressured by lenders to pay back on time.

But deferring repayments will have at a cost for local lenders. “According to microfinance principles, the whole operation will stop functioning if the repayments are suspended as new loans are given out from the recollected funds. There will be both pros and cons for payment suspension,” said Daw Phyu Yamin Myat.

Earlier, officials urged the lenders to make adjustments on their own to cope with the situation without waiting for the government’s announcements. Several regional governments have already announced the suspension of microfinance company operations since last month.

The World Bank last month said the impact on the Myanmar economy is “estimated to be severe” but will be partially countered by “strong performance” in growth before the outbreak. Myanmar is still expected to experience GDP growth but at a much slower rate than the pre-pandemic forecast. – Translated

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Source : Myanmar Times

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