The Japan International Cooperation Agency (JICA) is negotiating with the Japanese government to give more loans to Myanmar’s small and medium enterprises, U Pe Myint, managing director of Cooperative Bank, said.
The SME development sub-committee also confirmed that it is planning to grant the two-step loan from JICA to Myanmar Economic Bank, which disburses the funds to local banks to provide financing for SMEs.
“JICA is still discussing with its government. The loans will be granted after the negotiations are completed. However, we don’t know the exact amount of the loan,” U Pe Myint told Myanmar Business Today.
Myanmar Economic Bank is expected to get the Official Development Assistance (ODA) loan from JICA to distribute the funds to Myanmar Citizens Bank, state-owned Small and Medium Industrial Development Bank (SMIDB), Cooperative Bank, Kanbawza Bank and other private banks with an interest rate of 4 percent. The banks will then give loans to SMEs at an interest rate of 8.5 percent.
“For the international loans, the government is paying an annual interest of 4 percent but the banks are redistributing them at 8.5 percent, which is more than double. But, currently private banks give loans at 13 percent, so 8.5 percent is still good for us,” U Myat Thin Aung, chairman of Industrial Entrepreneurs Association, told Myanmar Business Today.
Government and bank officials said the gap in interest rate exists due to currency rate fluctuation factors (the JICA loan will be provided in Japanese Yen) that are calculated in a long-term (20 years) loan. Other factors that drive up the gap are banks’ management expenditures, infrastructure and risk management costs.
Besides, according to the Central Bank of Myanmar’s current deposit rate policy, lending rates are not allowed to go below the deposit rate, which is 8 percent.
