Burma to Boost SME Access to Capital Through $50Mln Loan From Singapore, Vietnam

By Thit Nay Moe 21 November 2014

RANGOON — Burma’s Ministry of Industry signed an agreement last month to borrow US$20 million from a Singaporean private bank and $30 million from a Vietnamese state-owned bank so that it can increase government loans to small and medium enterprises (SMEs), a ministry official said.

Aye Aye Win, deputy director-general of the Small and Medium Enterprises Development Center, said a total of $50 million in capital had been secured by the ministry and would be loaned out through its Small and Medium Industrial Development Bank (SMIDB) next year.

“We signed a MoU [memorandum of understanding] in October. We’ll borrow 20 million US dollar from Singapore and the rest from Vietnam,” he said.

Aye Aye Win said the funds would be borrowed from the overseas bank at a 4 percent interest rate, adding that loans will be made available to Burmese businesses at “between 6 percent and 8.5 percent, but we are considering the possibility of setting the interest rate at 6 percent.”

Aye Aye Win declined to reveal the name of the foreign banks, but local media previously reported that a Singaporean private bank and the Bank for Investment and Development of Vietnam (BIDV) would provide the capital.

This year, the SMIDB has provided about $20 million in loans to local SMES at an interest rate of 8.5 percent, according to Aye Aye Win.

The government has been drafting a new SME Bill that was brought before Parliament earlier this year, but scant details have been made available about the bill. An estimated 88 percent of all businesses in Burma are small and medium-sized enterprises.

The Japan International Cooperation Agency (JICA) is reportedly also cooperating with the government to help scale up government loans to SMEs in Burma. JICA plans to provide funds to this end through the Finance Ministry, but few details have been released about the plan.

The International Finance Corporation, the World Bank group’s private-sector arm, announced in September that it will provide $5 million to Serge Pun’s Yoma Bank so that it could provide funds to SMEs.

Small and medium-sized businesses in Burma struggle to gain access to capital as a result of decades of economic mismanagement under the former military government. Its policies left the country with an underdeveloped financial sector, a decrepit economy controlled by conglomerates and an anachronistic system of government banks and state cooperatives that provide loans to farmers and SMEs.

Improving access to capital is seen as key economic reform measure by the government, which last year took a $100 million loan from China to provide microfinance loans to farmers through its state cooperatives.

International microfinance institutions are, meanwhile, also eyeing Burma’s underserved rural economy and in the hope of providing microloans, often on a commercial basis, to the country’s millions of farmers.

In early November, Burma’s state-owned Rural Development Bank announced that it threatening to sue 15,000 farmers in Irrawaddy Delta as they had not repaid their microloans on the time.