Small and medium enterprises (SME) in Myanmar have not shown any interest in buying credit insurance plans offered by the Myanmar Insurance Enterprise (MIE), a senior official said.
MIE started offering the credit insurance plans in January last year to SMEs, however, there has not been a single buyer.
The initiative was targeted towards SMEs so that they can get insurance for their bank loans, but banks have not yet been effective enough in disbursing loans to SMEs, hence there are no buyers, U Aye Min Thein, managing director of MIE, said.
“We are offering loan insurance coverage but no one is buying. The banks are yet to effectively give loans to SMEs,” he told Myanmar Business Today.
The bank loan insurance compensates SMEs if they fail to pay bank loans due to suffering from unavoidable natural disasters, and MIE also insures those who don’t have collateral to obtain bank loans.
To get loan insurance, SMEs need to pay 2 percent of the total amount as premium in the first year, and 1.5 and 1 percent respectively in the second and third years.
“The rate is only K2 for every K100 in loans for one year. If the customer has no collateral, it is raised to K3. The customers will be scrutinised every year and the duration of contract is one year,” said U Aye Min Thein.
However, an official from the Small and Medium Industrial Development Bank (SMIDB) said it is MIE who is not interested to insure SMEs.
“To give out a loan, we evaluate SME owners, and then we transfer the case to the insurance enterprise. If [MIE] finds out that the SME is risky and might not be able to pay back, they never get back to us,” Dr Than Tun, chairman of SMIDB, told Myanmar Business Today.
Recently, the government allocated K20 billion in loans for SMEs, while Vietnam and Singapore pledged $50 million grant.
The bank loan insurance is only available via Myanmar Insurance Enterprise and private enterprises are not allowed to offer this service.