HomeMMBIZ NewsSMEs Soon to Get Loans without Collateral

SMEs Soon to Get Loans without Collateral

Small and Medium Enterprises (SMEs) will be able to access unsecured loans after the SME law is enacted, a senior official from the Ministry of Finance said.

Daw Aye Aye Win, deputy director general of the Central Department of Small and Medium Enterprises Development, said that financial institutions to support loans without collateral can only be implemented after the SME bill, which was recently approved by the upper house, is passed by the National Assembly.

“After the law is passed, financial instruments such as an innovation fund or a creative fund can be established. To effectively implement a credit rating system, a credit guarantee corporation must be set up,” she said at a forum in Yangon.

The Ministry of Finance aims to implement a credit rating system where the credit guarantee corporation will evaluate the assets of SMEs and their credit worthiness.

“The credit guarantee corporation will be responsible to appraise the conditions of SMEs including their market potential, product feasibility and the investment capital before bank loans are approved,” Daw Aye Aye Win said.

Unsecured loans are currently possible through the coordination of relevant government departments, guarantees of the state-run Small and Medium Industries Development Bank (SMIDB) and an underwriting agency. However, the process is extremely complicated and time-consuming.

The upcoming SMEs law is expected to set standards for accurate evaluations and underwriting, the Ministry of Finance said.

Instead of being overseen by government departments, the SME industry should be focused by institutions that can systemically work towards the development of industry, said U Hla Khine, and industrial leader in Pyay industrial zone.

“It would be great if SMEs can secure loans without collateral, but we haven’t even received loans that we have requested [from the government] before. While the operations were delayed by lack of funding, the steep rise of the dollar exchange rate has hurt the SMEs badly,” he told Myanmar Business Today.

He also called for one-stop service centres for loans that can handle all the application procedures in a single place. Opening such centres in every state and region will expedite the access to loans and cut unnecessary costs, he added.

The government has put aside K20 billion ($20 million) for government lending in 14 states and regions where each state and region are allotted K1 billion to lend to eligible private businesses via the approval of relevant Electrical or Industrial Ministers.

In addition, the government has signed memoranda of understanding in October to borrow $20 million from Singapore and $30 million from Vietnam to lend to SMEs in 2015.

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