Burma Signs Trade Finance Agreement with ADB

By Kyaw Hsu Mon 10 September 2015

RANGOON – Burma’s government signed a framework agreement with the Asian Development Bank on Wednesday that will allow the latter to introduce its Trade Finance Program (TFP) to the country.

In a statement issued by the Manila-based institution on Wednesday, Maung Maung Thein, Burma’s deputy finance minister, welcomed the program which he said will enhance “the capacity of partner banks to provide trade finance to Myanmar’s importing and exporting clients.”

The agreement was signed by Maung Maung Thein and James Nugent, Director General of the Southeast Asia Department in the Asian Development Bank (ADB), on Wednesday in Naypyidaw.

According to the ADB statement, under the agreement the group will assist local banks by providing credit facilities and technical assistance and guaranteeing “trade finance instruments, such as letters of credit” issued by the banks.

The agreement also aims to assist local banks in developing relationships with their international counterparts and better utilizing trade finance tools.

“Trade finance promotes trade and investment, and assists domestic Myanmar businesses to enter and compete in international markets,” James Nugent said in the statement.

Maung Maung Lay, vice-chairman of the Union of Myanmar Federation of Chambers of Commerce and Industry, welcomed the agreement on Thursday, saying it could provide a welcome boost to many of the country’s struggling small and medium-sized enterprises (SMEs).

“Trade finance is very important for SMEs here. Even when they have plans and projects, without finance they have problems starting work. If banks and international institutions can support them, it will encourage their development,” he said.

In June, ADB organized a workshop in Rangoon in collaboration with the Myanmar Banks Association to address what it said was a lack of finance directed to SMEs, inhibiting their growth.

“The sector has been hampered by a lack of access to finance, partly because of restrictive collateral requirements, but also because of a lack of capacity among local banks to assess and manage operational and credit risks for smaller businesses,” it said in a statement at the time.

SMEs still struggle to obtain loans from private banks in Burma, said Maung Maung Lay. “That’s why trade finance is very important for this sector’s development.”

In 2014, ADB approved US$246.4 million worth of loans, grants and technical assistance to Burma, according to a factsheet released by the group in April.