ADB to extend loans in support of development in Myanmar

Myanmar is planning to take a US$60 million loan from the Asian Development Bank (ADB) to establish a Credit Guarantee Corporation (CGC), U Maung Maung Win, the Deputy Minister for the Ministry of Planning, Finance, and Industry, said in Parliament on May 21. The proposal was sent by the President.

U Maung Maung Win said small and medium enterprises (SMEs) in Myanmar lack a credit guarantee system which limits the amount of unsecured loans the banks are able to extend to an SME.

In Myanmar, 98pc of the economy comprises SMEs, while 95pc of the workforce is employed by this sector, according to government data.

Yet, bank lending for business in Myanmar comprises just 37 percent of GDP, which is low compared to other countries in the region. “Establishing the CGC will help solve the problem of SMEs having insufficient collateral and documentation, which prevents them from getting a loan from the banks,” he said.

The ADB will extend the loan at an interest rate of 1pc per year during a grace period of eight years, and 1.5pc per year during the repayment period over the next 24 years.

The CGC will be formed in three stages. Under the first and second stages, to be complete before the end of the year, a wholly-owned CGC will be established by the government utilising the ADB loan. The third stage will see the CGC sign agreements with financial institutions to establish the necessary financial systems required. This will be implemented between 2021 and 2025.

Meanwhile, Myanmar will also receive some $1.8 billion in financial support for development projects in the country from the ADB, according to the Ministry of Investment and Foreign Economic Relations (MIFER).

This will include a $1.7 billion concessional loan and a grant of $70 million to build infrastructure for transport and energy as well as for education, healthcare and urban and rural development, said U Than Aung Kyaw, Director General of the Foreign Economic Relations Department under MIFER.

This aligns with the ADB’s business plan for Myanmar over the next two years, released on May 18, as well as the Myanmar Sustainable Development Plan. It also comes on the heels of the World Bank’s Country Partnership Framework for Myanmar for the next three years. The World Bank last month fast-tracked a US$50 million loan to Myanmar to help with the country’s COVID-19 response.

During 2013–2019, ADB extended funds totalling $2.4 billion to support development in Myanmar.

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Source : Myanmar Times

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