Vietnamese bank steps in to finance local small-scale loans

The Small and Medium Industrial Development Bank (SMIDB) will fund its SME loan program this year through a Vietnamese wholesale loan at half the interest of previous loans from Myanmar state-run banks, officials said.

The US$30 million wholesale loan from Bank of Investment and Development of Vietnam (BIDV) at a 4 percent interest rate will be split into 1 billion kyat (US$1 million) increments for each state and region, with some left in reserve.

SMIDB had been finansing its small loan program partly through credit lines of about K20 billion at 8.25pc from the Myanma Economic Bank each year. However, BIDV’s loan to SMIDB is at 4pc, meaning it is possible lower interest rates will be passed on to Myanmar SMEs, said SMIDB managing director U Tin Maung Htay.

“This is the first time we have received financial assistance through foreign banks,” he said. “We will negotiate interest rates and try to get lower rates than current levels.”

SMIDB signed agreements with the International Bank of Korea and Japan’s Mizuho Bank for technical assistance last year.

Meanwhile, the Ministry of Agriculture and Irrigation has retreated from a plan to have Mandalay government officials disburse agriculture loans, and will instead rely on state-owned Myanmar Agriculture Development Bank (MADB) under its control.

In May local ministry officials had said region and state teams would disperse loans, before changing course at the end of the month, said an official from MADB who requested anonymity.

“We received guidance that the Myanmar state government team would take control in May, but it has changed back to the original plan,” he said.

The ministry has earmarked about K70 billion in loans to Mandalay Region farmers for the planting season. The bank started lending on June 4, and had disbursed about K1.5 billion by June 6, he said.

Interest rates had also been lowered from 8.5pc to 5pc in the region.

Farmers told The Myanmar Times that while they were generally unaware whether bank or government officials were to disperse loans, they were happy with the recent decrease in interest rates.

Source: Myanmar Times

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