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May 29, 2020

MEB offering two-step loans to develop MSMEs

A worker control the machine at a rubber factory in Kawthoung. Photo: Aye Than

The Myanma Economic Bank has been providing two-step loans, funded by the Japan International Cooperation Agency, since September, 2018 to help develop Myanmar’s small and medium enterprises.
The bank is offering mortgage-backed loans of up to K500 million at an annual interest of 8.5 per cent for a term of over 3-5 years. Businesses which are unable to put up sufficient collateral can access loans of up to K20 million under the Credit Guarantee Insurance (GI) scheme. The interest rate for CGI loans ranges from 9 to 13 per cent, depending on the credit rating of the businesses.
Also, receiving CGI backed loan of Myanma Insurance is paid 2 per cent with collateral to 3 per cent without collateral to Myanma Insurance. Eighty per cent of the loan is set aside for fixed capital, while the remaining 20 per cent is used as working capital. Fixed capital includes assets and capital investments such as property, plant, and equipment, not intended for land tenure.
Entrepreneurs can apply for the JICA MSME two-step loan at the nearest MEB branch.
All SMEs engaged in manufacturing, labor-based projects, retail and wholesale, service and other businesses are eligible for the JICA SME two-step loans. However, farmers who have access to loans provided by the Myanma Agricultural Development Bank, real estate agents, finance and insurance businessmen, precious metal dealers, those operating liquor shops and entertainment and amusement businesses, and manufacturers of arms and ammunition cannot apply for the loans, according to a press statement issued by the MEB last year.
In the 2015-2016 fiscal year, 11 businessmen took out JICA two-step loans of K4.8 million through the SMIDB. In the 2016-2017 FY, JICA offered K36.7 billion in loans to 175 entrepreneurs, and K16 billion in the 2017-2018 FY. JICA’s two-step loans are offered at an interest rate of 0.01 per cent to the government, which provides the loans at an interest of 4 per cent to private banks, which, in turn, offer the loans at an interest of 8.5 per cent to SMEs. Some businessmen have complained of financial institutions following a tight verification process. There are over 67,000 registered SMEs in Myanmar, yet there are many unregistered businesses, according to the SME Development Department. The SMEs constitute 90 per cent of Myanmar’s businesses. Most of them are facing barriers and challenges in terms of capital, technology, and market access.—GNLM (Translated by Ei Myat Mon)

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