Government extends loans to agriculture, construction, SME sectors
State-owned Myanma Economic Bank (MEB) will extend medium term loans to companies in the agriculture, small and medium enterprise (SME) and construction sectors, the government said last week. The loans to these three sectors will be term loans of 3-5 years.
The MEB will extend loans to the agriculture sector through the Myanmar Agricultural Development Bank (MADB). The latter will lend to agricultural as well as aquaculture businesses at an interest rate of 9 percent.
In the construction sector, the MEB will provide financing through the Construction and Housing Development Bank (CHDB), which will lend to the relevant businesses at an interest rate of 11pc.
Meanwhile, MEB will lend directly to the SME sector, including those in the manufacturing, export and import substitution, recycling and energy saving and other technology-based businesses, as many of these SMEs require loans with low interest rates.
Meanwhile, businesses that are unable to provide property or other assets as collateral will receive support from Credit Guarantee Insurance (CGI).
The government is offering loans to SMEs because local businesses are hugely disadvantaged in the market compared to other regional competitors, U Kyaw Win, Minister of Planning and Finance, said at The Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) Annual General Meeting in December.
Currently, the Small and Medium Industrial Development Bank (SMIDB) is extending loans to the SME sector with the help of Japan International Cooperation Agency (JICA). With the support of CGI, a larger number of SMEs with good business potential will have the opportunity to receive financing.
Meanwhile, private banks also extend commercial loans to the SMEs but with interest rates of up to 13pc. As such, many SMEs faced difficulties in obtaining financing even though this sector represents 90pc of the Myanmar economy.
As such, if SMEs receive funding with low interest rates from the government, these businesses will have better opportunities to compete and operate in the market, said Dr. Aung Thein, chair of the SME Development Committee at UMFCCI.