A businessman holds out cash in the local
currency, the kyat, access to which is expected to be easier following a
recent CBM move to permit loans without collateral. The Myanmar Times.
Local banks are now permitted to extend loans without the need for
collaterals, U Set Aung, Deputy Minister at the Ministry of Planning and
Finance, told The Myanmar Times at the 5th Asia SME Conference in Naypyitaw on October 14.
“The Central Bank of Myanmar (CBM) has allowed local banks to provide
loans without movable and resalable assets as collaterals provided the
banks set the suitable risk management policies in place. The loan
process will become complete when the banks can implement proper risk
management,” U Set Aung said.
The development should serve as a welcome reprieve for many
cash-strapped SMEs. In Myanmar, access to funds is the main barrier in
the way of growth and development of small and medium enterprises
(SMEs). This is because loans issued to businesses are approved based on
collateral –typically property or land - and are mostly over periods of
just one year.
As such, relaxing the loan collateral system is necessary to help more SMEs qualify for loans.
Fund limitations
It
is like buying a car without fuel and it is impossible to drive without
fuel.” U Ngwe Tun, chair of Aung Nay Lin Tun Company which produces
Nyan Gyi Shin coffee, told The Myanmar Times.
“Without capital, one small business cannot develop and expand. Today’s
world famous Apple Co. started as a small business. But they had the
financial support which we don’t have,” said U Kyaw Win, president of
Sinma, a furniture export firm.
Credit is also notoriously steep in a country that for years had been
plagued by high inflation. Interest rates for local banks are fixed by
the CBM at 8.5 percent to 13 percent.
Be self reliant
But businesses should not expect to be handheld by the government and
should learn to stand on their own feet, U Set Aung said, adding that
with lower inflation and a stable exchange rate, the government has
created “a friendly and attractive environment to facilitate investments
and address the multinational issues faced by SMEs.”
“But there are also many things SMEs can do to help themselves,” he said during his speech at the conference in Naypyitaw.
One way is by using mobile technology to create new ways of doing
business or facilitating existing operations. For example in Myanmar,
mobile phone penetration has grown to over 100pc in 2017 compared to
just 4pc four years ago. Leveraging on this, SMEs can create new
business models in areas like mobile financial services, such as
devising better solutions for cross-border payments.
There are many ways for to bypass the challenges of cross-border
transactions such as exploring the use of bitcoins and other
cryptocurrencies, U Set Aung suggested. “We are talking to the Monetary
Authority of Singapore and the Bank of Thailand to enable cross-border
mobile payments to take place on a real-time basis,” he said, adding
that the process is not easy and that SMEs should work together to find
solutions and expand.
Currently, there are over 20,000 registered SMEs in Myanmar. The SME
Development Department has already recommended about 4,000 SME for loans
and about 1,000 of them have successfully obtained access to credit for
further expansion, The Myanmar Times understands.
Announcement for requesting approval of the Central Bank of Myanmar for offshore loan!
1. In accordance with paragraph 48 of the
Foreign Exchange Management Regulation, resident shall not take foreign
loans from abroad or conduct other types of borrowing abroad or
documents that are likely to be loans without the prior approval of the
Central Bank, and shall comply with the provisions of the Central Bank.
2. As per para1, resident, who wants to seek
an offshore loan, to get the approval of the Central Bank of Myanmar
may apply directly or through Myanmar Investment Commission to the
Central Bank of Myanmar by the following documents:
(a) An application which is addressed to "the Central Bank of Myanmar, Office No(55), Nay Pyi Taw".
(b) Relevant documents with regard
to the company's profile such as Company Registration Certificate, Form
VI, Form XXVI, Memorandum of Association, Memorandum of Articles, etc.
(c) If the company has been already
established, financial statements for the current year and previous
year as approved by an external certified auditor, who should be a
Certified Public Accountant.
(d) Loan Agreement (Draft) including repayment schedule for the proposed loan and other relevant data.
(e) Bank Credit advices evidence of equity transferred to the company (borrower).
(f) Other documentary evidence.
3. Based on the submitted documents, the
Central Bank of Myanmar will review and scrutinize the following facts,
and approve or reject the proposal:
(a) Whether the amount of equity capital of the applicant exceeds USD 500,000.
(b) Whether the applicant (borrower) has an access to a matching foreign exchange income or not.
(c) Whether the borrower is able to
repay the loan from the income generated from domestic business, and
has plans to mitigate the exchange risk even if he or she does not have a
foreign exchange income.
(d) Whether the borrower has already transferred 80% of equity committed in MIC permit or not.
(e) Whether Debt to Equity Ratio is within a maximum of 3:1 and 4:1 or not
(f) Whether there are completion
and correctness of terms and conditions mentioned in loan agreement and
documents or not.
(g) Whether the loan tenure is
medium-term or long-term, and loan repayment schedule is consistent with
loan agreement or not.
The government has recommended over 1,000 domestic small and
medium-sized enterprises (SMEs) to receive loans from banks, according
to the Central Department of Small and Medium Enterprises Development
(CDSMED).
More than 1,000 SME among an estimated 9,000 in Myanmar have
been recommended by the CDSMED to receive loans, an official from the
department told The Myanmar Times.
There are 46,794 industries officially registered at the Ministry of Industry in Myanmar.
The department issues membership cards to local SMEs and its membership numbers at approximately 9,000.
The CDSMED has made recommendations to financial institutions
on providing loans for over 1,000 enterprises. The banks will offer
loans after making an assessment on the recommended SMEs.
“First of all, SMEs which want to borrow have to apply for membership
for the Central Department of Small and Medium Enterprise Development.
“The department provides recommendations for any member who wants to
take a loan. Financial institutions will offer loans after assessments
have been made for the SMEs that we recommended in accordance with their
procedures.
“The department is supposed to give a recommendation to banks or
financial institutions about which SMEs are members of the department.
Now we are working to provide SME loans by cooperating with local
banks,” he said.
Number still small
However, given the estimated overall number of businesses and
enterprises, the number of SMEs recommended by the CDSMED is still
small. And, relatively few local enterprises have received loans.
“Despite the large number of SMEs which were granted membership
cards, most haven’t applied for loans. We just give recommendations,”
the CDSMED official said.
Currently, the Japan International Cooperation Agency (JICA) has
offered SME loans through local banks. Local SMEs which want to take SME
loans with an 8.5 percent interest rate can apply at the department. At
present, KBZ and CB banks have been providing SME loans under this
program.
“The Japan International Corporation Agency linked up with local banks to pay small and medium-sized enterprises loans.
“When businesses submit their applications and documents to us, the banks, we also send the information submitted to JICA.
“After JICA has green-lighted the application, we pay the loans,” U
Zaw Man Oo, assistant general manager of KBZ bank, small and medium
banking enterprise department told The Myanmar Times.
“Loans for SMEs will be easier to acquire.”
“Borrowers can discuss with banks, depending on the amount of loans,
and whether they are capable of providing collateral. However, the
projects must be systematic,” U Saw De Nol Khuu, leader of the project
from CB Bank told The Myanmar Times.
Challenging conditions
Loans are being extended to SMEs by the Small and Medium Industry
Development Bank (SMIDB), KBZ Bank, Yoma Bank and other domestic banks.
But the loans require collateral and a minimum of two-year operating
experience. These present difficulties for new businesses to have access
to those financial resources.
“I am doing business in the field of selling international flight tickets.
“I would like to expand my business but it requires a two-year
minimum operating experience. So it is difficult to secure the loans and
expand the business for now,” a young entrepreneur said.
It is not only the SMEs who find it difficult to receive loans.
Moderately established businessmen also have difficulties to secure
loans in Myanmar, according to businessman U Nay Lin Zin, who is
involved in import and export trade.
Central Bank of Myanmar Strengthens Grip over Foreign Loans
Reuters.
With
a new circular letter addressed to Myanmar banks dated 3 July 2014 (the
CBM Letter), the Central Bank of Myanmar has reasserted control over
foreign loans that are provided to domestic and foreign owned borrowers
in Myanmar. The CBM has clarified approval requirements and increased
the accountability of Myanmar banks for foreign loans that are brought
into the country. The CBM Letter covers situations where the borrower
has obtained a permit from the Myanmar Investment Commission (MIC), as
well as all other borrowers.
Ever since the adoption of the Foreign Exchange Management Act (FEMA)
and the Foreign Investment Law (FIL) of 2012, the fate of foreign loans
has always remained somewhat confusing. Although there is no doubt that
loans from overseas are possible as a principle under both instruments,
in practice clients often received conflicting information from bankers
and advisors with respect to the approvals and process concerned.
Unfortunately, this confusion that was not really cleared up with the
CBM Directive of 2012 which implemented FEMA (Foreign Exchange
Directive).
Why the confusion?
Part of the problem is FEMA itself. In the text of the law, the
crucial distinction that is made to allow foreign exchange remittances
is that of “current account” versus “capital account”, concepts that are
of course adopted from international financial law. In the Myanmar
system, any payment that is a current account payment will not be
restricted by the CBM. Certain capital payments can be restricted by the
CBM. So, it is crucial to know for any payment which category applies.
First of all, the definitions are not ideally drafted in FEMA since
there is only a very brief description of what comprises the “current
account”, and “capital account” is basically defined as anything which
is not in the “current account”.
Some of the confusion that has plagued foreign investors stems from
the fact that payments on loans are mentioned in both categories, and
without any clearly prescribed differences. In s.2 (l), a short-term
loan can resort under “current account”, (without specifying the term of
such a short-term loan). However, in s.30 reimbursement of loans in
general is also mentioned in connection with the “capital account”. In
other words, loans are straddling the two different main categories
without clearly spelling out which characteristics would end up a loan
in the one or in the other category.
But there is more. The Foreign Exchange Directive of 2012, loans are
included under the “current account”, but it is unclear if only
short-term loans are meant. Plus, the Directive only refers explicitly
to loans approved by the MIC in its overview table and leaves upon the
question what would happen with borrowers which are non-MIC.
Finally, s.17 of the Foreign Exchange Directive of 2012 specifies
that Myanmar banks need to review the “purpose of transfers” to assess
whether the transfer was really a current account payment. If it is not,
the remittance may not be made.
To sum it up, the Myanmar regulation of the loans are caught in
seemingly overlapping local interpretation under FEMA which goes well
beyond the classic “current account” and “capital account” bifurcation
as a change of ownership in domestic assets, akin to what is found in
international financial law. Moreover, Myanmar banks may have their own
interpretation of the “purpose” of a transfer.
New CBM Letter on foreign loans
The CBM Letter clears up a few things, but also creates a set of new
challenges. The CBM Letter introduces a list of elements that Myanmar
banks need to take into account when evaluating foreign loans,
including:
· Size of loan and tenure, and loan contract
· Whether the interest rate is a market-based interest rate
· Whether the business plan of the resident borrower is appropriate
· Type of the collateral and whether it is capable of being performed in law
· Whether the repayment schedule is appropriate; and
· Other elements detailed in the CBM Letter.
The CBM Letter provides that “licensed banks trading foreign exchange
shall review the points contained [above] on the basis of the local
business situation, the situation of the project to be executed with
foreign loan and its expected income, capability to repay loan and
profitability to the country and its people”.
The CBM Letter envisages a new reporting and approval system, where
Myanmar banks will need to collect certain data, make an assessment
about certain criteria, report information to the CBM, and receive an
approval. It seems to us that the Myanmar bank would have to go through
this new process for each loan, even loans that were already approved by
the MIC. For a Myanmar bank not to go through the process and receive
CBM approval, which is theoretically possible as there is no physical
restraint on release of funds by a Myanmar bank, might engage its
liability.
What will happen in practice?
Obviously, the rather wide scope of this criterion may pose some
problems for Myanmar banks to interpret and apply. There is little to
gain for a Myanmar bank by venturing out ahead of CBM approval, so the
effect will often be that inward funds will not be released until the
CBM has so approved based on a review of the information that must be
collected under the CBM Letter.
That means for inward remittances that a transfer should be well
prepared in advance. The required documents should be collected in
advance, and an assessment should be made whether the documents show any
lacuna which might hold up the release of the funds. Clients should
take the matter up with their Myanmar banker, and if necessary retain
professional advice. Inward remittances might cause real problems in a
number of cases, such as when an operating license for a business has
not yet been secured, when the contract is not enforceable on its face,
or when there are legal impediments with respect to the assets connected
with the loan. Of course, in a more general sense one might encounter
problems with the paperwork or with communication.
Problem scenarios for repatriation
It is essential for repatriation purposes that the person who has
brought in the funds has properly documented its involvement. Only this
person can extract the same funds again, as a rule. In general, this
means that clients should document the process well. In some exceptional
cases, there may be difficulties with this. For example, in some cases
funds are brought in as an advance to a local partner in a joint venture
before the actual JVCo is setup in Myanmar. For example, the local
partner might have to pay a deposit on a lease contract to secure a
property before the formalities of company establishment have been
completed. So, the capital account of the JVCo will not show the person
who brought in the funds. If such issues are not fixed in terms of
paperwork, there is a risk that the re-extraction of the funds might be
disallowed at a later stage.
Edwin Vanderbruggen is Partner at Yangon-based law and tax advisory firm VDB Loi.
SMEs Development MEB, six private banks to lease K30 billion to SMEs
Myanma
Economic Bank, teaming up with six private banks will give K30 billion
loans to small and medium enterprises (SMEs), according to Ministry of
Industry.
The country’s SMEs can acquire loans from the Myanma Oriental Bank,
Ayeyawady Bank, from Co-Operative Bank (CB), commonly known as CB Bank,
the Myanmar Citizens Bank, the Kanbawza Bank and the Small and Medium
Industrial Development Bank under the Credit Guarantee Insurance (CGI) system, Daw Aye Aye Win, the head of the
industrial inspection and administration department of the Ministry of
Industry, said yesterday at a forum on prospects for SMEs held in
Yangon.
The move is aimed at developing SMEs in Myanmar, she added.
“To get the loans, SMEs should provide enough collateral or strong business, and they can apply for loans at the banks by September” said Daw Aye Aye Win.
The businesses can get at least K15 million to K500 million with the interest rate of 8.5 per cent, and if they can not provide collateral, they need to pay another 2.5 percent. The duration of the loan is set for five years.
The CGI system is jointly implemented by Myanma Insurance, Sumitomo Mitsui Banking Corporation and CB Bank.
Small and Medium Industrial Development Bank (SMIDB) announced last
month that 300 Small and Medium-sized Enterprises (SMEs) have
outstanding repayments for the 2015-16 fiscal year.
K5bn have been issued to 11 SMEs this fiscal year, and K20 billion issued to SMEs in the 2015- 2016 FY by the SMIDB.
At the moment, 90 per cent of Myanmar Businesses are SMEs.
Small and medium enterprises (SMEs), the backbone of Myanmar’s economy, say they are still struggling to source financing for start-ups and business expansion with insufficient funding made available by banks.
President U Thein Sein’s government has recognised the importance of SMEs, the pillar of the private sector
which accounts for 90 percent of economic output, and has established
an SME Development Center under the Ministry of Industry. Part of its
mandate is to provide training to SMEs on understanding banking
regulations and processes required to obtain bank loans.
Despite such efforts, a survey of some 2500 SMEs by the German
Institute for Development Evaluation, published last August, found that
only about 20pc of SMEs have an outstanding loan.
“Customers and relatives or friends are clearly the most common
source of finance. Key factors are trust and longstanding relationships.
Larger firms also regularly apply for loans from commercial banks. Land
and buildings are usually used to satisfy collateral requirements. Most SMEs have considerable additional funding needs and plan to apply for loans for business expansion,” the report said.
Ma Kim Chaw Su, managing director of the International Banking division at KBZ Bank, said SME owners and managers lacked understanding of financial accounting in applying for loans.
“We need to sure the business is strong and we also look at
cash flow, products and business projects. Foreign banks also look at
these points with my bank,” she said, referring to loans made available
by newly opened foreign banks in Myanmar for SMEs through local banks.
Loring Harkness, founder of Ngwe Su, a community finance platform, says owners of micro businesses often do not have access
to financial services and, when they do, those financial services are
not always affordable. Access to savings, investments and insurance
should be expanded, he said.
“Some micro businesses don’t need financing if someone already has
the money. You can start a micro business with little or no money at
all. Myanmar banking should catch up soon but right now it’s very behind. Loans are only available for the rich,” said Ryan Russell, senior consultant at Myanmar Business Answers.
“There is a huge gap between them, with micro-finance that starts at
$30 and goes as high as US$5000 and $1 million which is where the banks
are at right now. A lot of micro businesses need $2000 to $20,000 to
get started. And many could use a lot more if they are going to start
with several staff on salary,” he said.
According to U Aung Min of the Union of Myanmar Federation of
Chambers of Commerce and Industry, banks extended loans totaling K30
billion ($23 million) to 344 businesses in the first nine months of last
year.
U Zaw Min Win, chair of the Myanmar Industries Association, said interest rates of 8.5pc were too high for many businesses.
Kee Shin, president of Malaysia’s Small and Medium Industries
Association, told a recent meeting of the ASEAN Economic Community that
governments needed to give consistent and stable support to SMEs. Some
90pc of small businesses were worried about the challenges of financing
and most countries in the economic region were witnessing a slowdown in
SME growth, he said, stressing also the need for foreign direct
investment and intervention by NGOs.
KBZ offers Myanmar citizens loans and overdrafts, in order to
promote development, increase business growth and to develop working
capital within the country.
Applying for a loan
A typical termcvttt of loan and overdraft is one (1) year
It is thereafter renewable on a yearly basis.Cards at our ATMs.
Interest
13% annual
Interest
Loan interest is paid on the total amount approved and overdraft interest is paid on the amount used.
Payment Period
1 Year
Required Documents
Business Information
• Business license form
• Company registration form
• Receipts of revenue tax for the last 3 years
• Financial statements for the last 3 years
Company
• Company registration form and if an export/import business the company must possess export/import license with valid dates
• Organizational records, Form 6, Form 26 and Form E
• A written approval from board of directors
• The paid up capital amount from an updated audited balance sheet and the paid up capital from Form E must be the same amount
Collateral
• Documents concerning the ownership of properties
• Grant, map and history of property
Under the Central Bank of Myanmar regulations, the following collateral are accepted
• Immovable properties
• Government bonds and securities
• Machinery
• Fixed deposits or Savings deposits
• Goods
• Gold
• Company Shares
Personal Documents
• Copy of National ID
• Household Registration
• Letter of Recommendation clearly stating that you are living in shared quarters
• Guarantee that you are single if you are single
• Divorce papers and papers proving you aren’t marrying any time soon
Find your nearest KBZ branch and
come and talk to one of our advisors in person
CB Bank to launch loan disbursement plan for SMEs
Yangon May 11
Cooperative Bank (CB) started implementation of a plan to disburse K20 million
in maximum to all smalland medium-scale enterprises without any mortgages,
according to the information from the Credit Guarantee Insurance and SME loan product introduction of the CB Bank on 6 May. The CB Bank disbursed loans to the SMEs with credit guarantee insurances as of March.
With regard to the rules, the SME which wishes to borrow loans through CGI must turn at least three years and it must be owned by Myanmar citizens. The applications must be attached to certificates of SME and financial statements. The interest rate is similar between the loans with or without mortgages. After taking the loans for one year, the SME must pay back interest to the bank monthly. The SME must put SGI at the Myanmar Insurance.
Cooperative
Bank (CB) has introduced a Credit Guarantee Insurance (CGI) system for
small and medium enterprises (SME) to help develop small businesses in
Myanmar.
The bank launched its first disbursement loan in cooperation with
Myanma Insurance Enterprise (MIE) and the SME Development Centre under
and Ministry of Industry.
“We especially focus on developing the SME sector in Myanmar. We want
SMEs to develop responsible businesses and pay taxes. These loans will
help SMEs build their businesses,” U Kyaw Lwin, CEO of CB, said.
To acquire the loan, applicants must to be responsible for providing a
certificate from the SME Development Centre, at least three years of
financial statements, proposals including detailed information and a
loan insurance certificate from Myanma Insurance Enterprise.
The loan process can be finished within a month depending on the required information, CB claimed.
“Myanma Insurance will check their finances, whether the business is
family-owned or a joint venture with foreign firms including other
stakeholders’ involvement. If an application matches with our criteria,
we will recommend them for CGI loan,” Deputy General Manager of MIE Daw
Hla Hla Mon said.
The maximum available loan amount is K20 million with a 13 percent
interest rate. Based upon the situation of individual SMEs, the loan
period is for one or more years. The borrowers must make monthly
payments on the loan during the allowed period.
MIE will pay 60 percent of the total loan to the bank as insurance
and if a natural disaster hits the business, the remaining 40 percent
will not have to be paid back by the borrowers, U Kyaw Lwin said.
Loan applications are received by all CB Bank branches across the
country, but processing time will be the quickest in Yangon, the bank
said.
YOMA BANK SME Banking!
Yoma Bank is committed to supporting SME
development in Myanmar. We believe that small business is the backbone
of Myanmar’s economy providing better services and products as we
emerge from decades of isolation. We also believe the SME are viable,
commercial enterprises that deserve the respect and high level of
service that a larger, corporate, client may demand. Our goal is to
support the development of SME into larger, sustainable businesses that
can expand nationally and across the ASEAN region.
Servicing SME requires significant
investment in technology and outreach that will allow Yoma Bank to
target these businesses in a sustainable manner. Our challenge is to
deliver competitive, quality products to our SME customers as well as
manage risk for the Bank. Currently Yoma Bank is identifying and
investing in these technologies with the goal of expanding its SME
offering in the years to come.
In the meantime Yoma Bank is actively
targeting SME in its loan portfolio - over 70% of our loans have been
made to SME with an average loan size of 175,000,000 kyat or USD175,000.
We are particularly pleased that many of these loans have been made
outside of the more developed commercial centres of Yangon and Mandalay
supporting broad based growth across Myanmar.
Yoma Bank - Corporate Video (English)
Corporate Banking
Yoma Bank presents a rich heritage and, just as importantly, a
bright future. Investing and growing a business in today’s Myanmar
fast-forward market is complex yet delicate. Our corporate banking team
comprises experienced bankers with in-depth knowledge and hands-on
experience, delivering you international best practices and solutions
tailored to your needs.
Our responsible corporate bankers understand business, and
can assist you to grow your business domestically and globally. We
provide a package of financial products and services that offers
convenience, value and flexibility for you and your business.
KBZ offers Myanmar citizens loans and overdrafts, in order to
promote development, increase business growth and to develop working
capital within the country.
in maximum to all smalland medium-scale enterprises without any mortgages,
Yoma Bank is committed to supporting SME
development in Myanmar. We believe that small business is the backbone
of Myanmar’s economy providing better services and products as we
emerge from decades of isolation. We also believe the SME are viable,
commercial enterprises that deserve the respect and high level of
service that a larger, corporate, client may demand. Our goal is to
support the development of SME into larger, sustainable businesses that
can expand nationally and across the ASEAN region.
No comments:
Post a Comment