Myanmar’s banking sector should work towards establishing credit bureaus that can provide “credit histories” of borrowers in a bid to provide a basis for creditors to access risks and actively screen provisions of loans, banking community said.
“The borrowers’ ability to pay back the loans is an important factor in evaluating them. Myanmar needs credit bureaus so that we can consult the credit histories to assess [risks] for loans,” an official from Kanbawza Bank told Myanmar Business Today.
The current terms on loans in Myanmar usually require collateral properties while providing a small portion of the collateral’s value as a loan, hindering many businesspeople who cannot provide any collateral to access these loans, she added.
“We need capital, particularly overseas funds. As the Central Bank chooses which foreign banks are to operate in Myanmar, the capital they bring will increase financial flows into the country. We need credit histories if we are to issue loans, and the Central Bank is starting to provide that. Our bank has also initiated microfinancing businesses,” she said.
The Central Bank has set the current interest rate at 13 percent, while the interest rate for small and medium enterprises (SMEs) is 8.5 percent, both of which are much higher compared to those of foreign countries.
“The current interest rate cannot be lowered, due to Myanmar’s 7 percent inflation rate, compared with that of 2 percent in Thailand,” said a banking consultant. The fluctuations of interest rates depend on the microeconomic market, he added.
However, Myanmar’s domestic market will soon be increasingly open to foreign banks, and even with pre-existing limits, a significant increase in financial flows and capital for loans is expected in the country.