By KHINE KYAW
FOLLOWING the recent issuing of Myanmar’s first credit bureau licence to a joint venture company between Singapore’s Asian Credit Bureau Holdings and Myanmar Banks Association, small and medium enterprises (SMEs) now have a chance for a brighter future, according to government officials and industry experts.
The licence will allow it to provide credit reporting services. Within a year of licensing, the bureau should be in operation.
Zayar Nyunt, chief executive officer at Small and Medium Industrial Development Bank, said the bureau would help a great deal in building trust between bankers and businesses.
“Trust is really important. Many SMEs in Myanmar lack capacity, skilled labour, technology and finance. Policymakers are trying to address these issues, and the credit bureau is an outstanding outcome from that,” he said.
“We urgently need to raise awareness about the credit bureau. The more people know about the credit bureau, the more they will make good use of that.”
Yet, he warned that improving access to finance alone could not make a small business successful.
“We also need to educate them on effective planning by making good use of the loan,” he said.
The banker admitted the current interest rate could be a burden for small businesses. He urged the government to set a special interest rate for SMEs depending on the macroeconomic statistics.
“Our bank is providing as many non-collateral loans to SMEs as possible. We provide short-term loans with a payback period of either six or nine months, depending on our field observations. But we still have the deposit issues,” he said, stressing the need for more budget allocations to support SMEs.
Vikram Kumar, International Finance Corporation’s country manager for Myanmar, said a good credit bureau could make borrowers more transparent, give confidence to lenders, and prevent individuals and enterprises from getting into too much debt, thus enabling greater financing to SMEs.
“Cross-country studies have showed that economies with better credit reporting tend to have higher availability of funding for the private sector,” he said.
He said it would take time for the credit bureau to acquire members and be ready with relevant and reliable data. Once the credit reporting services are available, lenders will have information on at least three aspects of a borrower: total indebtedness level, full borrowing history and complete repayment history.
“These will significantly help creditors in risk management, reduce information asymmetry, and control multiple borrowings. It will be good for both increasing funding to SMEs and for maintaining financial stability in the country,” he said.
According to Kumar, all other economies in the Asia Pacific region have made substantial efforts to build up their credit reporting system in the past decade, which subsequently has increasing SME lending significantly.
“A similar implication proportionate to the size of the financial sector and economy could also be achievable in Myanmar,” he said.
The credit market in Myanmar could be significantly strengthened if other areas of reforms progressed. And secured transactions will enable lenders to take movable assets as collateral conveniently and safely, he added.
Kumar hopes for the gradual liberalisation of Myanmar’s credit market, including risk-based pricing of loans, relaxation of interest rate controls, and greater entry of non-deposit-taking lenders.
In a bid to improve SME lending in the agriculture sector, state-owned Myanmar Insurance recently partnered with RGK+Z&A Group and Singapore’s InfoCorp Technologies.
The agreement, which was signed last week, will involve identification of cows and buffaloes by enabling the use of livestock as collateral in the loan application process.
Directorate of Investment and Company Administration (DICA) also reduced company registration fees from 500,000 kyat (Bt11.9 million) to 250,000 kyat (Bt5.95 million), with effect from April 1, to reduce the cost of doing business for SMEs and encourage increased company incorporations.
Aung Naing Oo, director general of DICA, said preparations are underway for new regulatory notifications and forms, public education and the establishment of a new electronic companies registry system. The new system will enable fast and efficient company registrations, submission of company filings and communications with the company registration office.
He said the DICA had prepared for the implementation of the new Myanmar Companies Law, which would take effect on August 1.
Minn Naing Oo, managing director of Allen & Gledhill (Myanmar) Co, said Myanmar’s regulatory framework has been improved a lot, leading to tangible benefits for local and foreign businesses.
“Having a good regulatory framework is critical, but implementation of these new laws is more important. We need to raise awareness about these laws so that local businesses ensure benefits from that,” he said.
He also stressed the importance of capacity building in the judicial sector, particularly to improve judges’ and lawyers’ knowledge on commercial laws in Myanmar.
Khine Khine Nwe, joint secretary general at the Union of Myanmar Federation of Chamber of Commerce and Industry, said the chamber prioritised building capacity of SMEs by holding a number of workshops and training sessions every month.