State-run Myanma Insurance Enterprise and an unnamed Japanese bank are cooperating to develop a security scheme to provide guarantees for loans secured by local small and medium enterprises (SMEs), officials from the Central Bank of Myanmar (CBM) said at a press conference.
Lack of financial data necessary to assess the credit worthiness of SMEs is posing a hurdle for banks issuing loans in Myanmar. In more developed economies, businesses are rated based on each relevant aspect such as their nature of business, productivity and repayment rates and methods, thus making it easier for them to access loans.
“Experts who came from Japan are working on this. There will be a scheme that guarantees portions of SME loans later,” said U Set Aung, deputy governor of CBM.
A businessman based in South Okkalapa said registered local SMEs are paying hundreds of thousands of Kyats in taxes yearly and it will be more convenient for the SMEs if the government opens a centre specifically to handle SMEs regarding registration, taxation and financing.
Currently, many SMEs are struggling to obtain financial support because they can’t provide collateral or secured data for the loans. But the new scheme to be developed with the help of a Japanese bank will provide guarantee coverage on specific percentages of SME loans based on the type of business, according to CBM.