Nobody has bought credit guarantee insurance as banks offer limited loans to small- and medium-sized enterprises (SMEs), according to Aye Min Thein, managing director of Myanmar Insurance.
Myanmar Insurance started selling loan insurance to SMEs in July.
He said: “The banks are disbursing loans to SMEs at the designated amount. But owners who want more loans can buy credit guarantee insurance. For instance, one takes loans from the Small and Medium Industrial Development Bank with collateral worth Ks 10 million. But the bank disburses Ks 3-4 million in loans. The borrower can buy the credit guarantee insurance for the remaining Ks 6-7 million if he or she wants Ks 10 million in full.”
Myanmar Insurance says it will pay compensation of up to 60 percent when the borrower who has bought the credit guarantee insurance is unable to pay back a loan for various reasons.
“Loans are so hard to get even with collateral. And the borrowers find it difficult to receive them without collateral,” he added.
The SMEs owners face a delay in taking out loans and repeatedly suffer from the lack of capital.
The premium fees for credit guarantee insurance differ depending on the amount of collateral. For those who have collateral, the premium fees are 2 percent of loans in the first year; 1.5 percent in the second year; and 1 percent in the third year. And for those who have no collateral, the premium fees will be 3 percent of loans in the first year; 2 percent in the second year; and 1 percent in the third year.
As a one-year trial run, Myanmar Insurance will carry out the credit guarantee insurance in Yangon.
Source: ELEVEN MYANMAR