Jun 27, 2011

Loans at 15% annual interest for Myanmar SME's

Myanmar Industrial Development Bank will provide loans to small- and medium-sized enterprises (SMEs) at an annual interest rate of 15 percent, the Minister for Industry 2 said last week.

U Soe Thein, who is also chairman of the national Industrial Development Committee, made the announcement during the 17th annual general meeting of the Myanmar Industrial Association (MIA) on June 11.

“Industrial companies have many capital, fuel, electricity, tax, procedure and technology requirements. We will be cooperating with MIA to meet these requirements,” he said.

To capitalise SMEs, Myanmar Industrial Development Bank will provide loans at 15pc to interested parties that meet certain requirements, he added.

A bank official said the loans will be provided via group sureties and not through mortgages. However, potential borrowers must have recommendations from MIA and will be subject to the discretion of the bank’s board of directors.

“We want to reduce the interest rates … But, we have to comply with the laws of the Central Bank. We are doing the best we can,” the union minister said.

A businessman from the logistics service industry said interest rates are still too high.

“In other countries companies can access loans between 4 and 6pc,” he said.

U Myat Thin Aung, the chairman of Hlaing Thar Yar Industrial Zone said: “In the group surety system, if one of the borrowers can’t repay a debt, the others have to repay instead.

“As a result, companies and business owners won’t back loans for people they don’t trust.”

Most of the nation’s industrial businesses are operated by the government, a hangover from the socialist era.

“Many industrial companies are barely operating at a profit. And if they are unable to offer competitive quality, they won’t survive,” the minister said.

He added that in order for government-run companies to modernise they must overcome a number of serious challenges.

“You should plan for this transformation,” the minister said. “We want to transfer our industries to you. It would be great if you were able to have funding and labour forces ready,” he said.

Source: Myanmar Times