August 19, 2016

New SME LOAN SCHEME — Loans with or without collateral now possible

A worker makes traditional earthen jars in Twantay, Yangon Region.—Photo: Aye Min Soe
A worker makes traditional earthen jars in Twantay, Yangon Region.—Photo: Aye Min Soe

Yangon — Myanma Insurance launched a new credit guarantee insurance service scheme for small and medium-sized enterprises on September 1 that provides, Deputy Finance Minister Dr Maung Maung Thein said on Friday.
The ministry officially announced the new policy of requiring collateral from SMEs in order to obtain a loan during a press conference at Myanma Insurance’s head office in Yangon on 4 September.
“Banks will have the right to offer loans with or without collateral,” Dr Maung Maung Thein said.
The Small and Medium Industrial Development Bank (SMIDB) is likely to provide more than K9 billion (US$7 million) in loans to SMEs through the new scheme, with a 9.5 percent interest rate that includes service charges, its Managing Director U Sann Maung said.
In June 2014, the state-owned insurance firm began selling loan insurance to encourage the expansion of the SMEs, which is a key driver of the country’s economic growth, Dr Maung Maung Thein added.
However there was very little interest from bankers, who were reluctant to provide loans without collateral. The previous credit guarantee insurance scheme grants the bank to provide only non-collateral loan for SMEs.
Should an SME be unable to repay the loan, local banks may now lodge a claim with Myanma Insurance, which will reimburse lenders for losses up to 60 percent of the total loan from the SME.
Some banks have already shown interest in granting loans to SMEs, Dr Maung Maung Thein said.
The SMIDB, which mainly offers loans to SMEs, has already granted nearly K22 billion loans to more than 400 SMEs.
Under the new scheme, borrowers will pay a 2 percent premium for collateral loans and a 3 percent premium for non-collateral loans.—GNLM


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