Myanmar to establish new credit law to support financing small businesses

The Financial Regulatory Department under the Ministry of Planning, Finance and Industry is in the process of drafting a Credit Guarantee Corporation Law, U Thant Sin, director of the department, told The Myanmar Times.

The aim of the law is to support the provision of financing for micro, small, and medium enterprises (MSMEs) by enabling the establishment of a Credit Guarantee Corporation to guarantee credit to such companies. It will also allow participating financial institutions to spread the credit risks and provide loans without collateral.

“Whether a collateral is provided or not, the state-backed Credit Guarantee Corporation can function as an intermediary organisation between the borrower and the lender. The Credit Guarantee Corporation on behalf of the borrower will give a guarantee to the lender for a loan. The borrower then pays a specified premium rate to the Credit Guarantee Corporation,’’ U Thant Sin said.

After the draft of the Credit Guarantee Corporation Law is completed it will be submitted to the Pyidaungsu Hluttaw.

Even though the Myanmar private business sector is dominated by MSMEs, many are unable to gain access to proper funds that enable growth. Spurred by the COVID-19 outbreak, the authorities have taken several measures to ease the borrowing process for this segment of the economy since the start of the year.

These include launching a K100 billion government fund for small companies as well as businesses in the tourism and garment manufacturing sectors. The Central Bank of Myanmar also lowered interest rates by 1.5 percent.

However, the moves have not been sufficient to support the ailing economy, as many MSMEs are still unable to fulfill the requirements needed to gain access to financing.

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Source : Myanmar Times

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