Myanma Insurance plans to establish the Credit Guarantee Corporation using Japanese aid for small and medium enterprises (SMEs), said Sett Aung, Vice Chairperson of the Central Bank of Myanmar on December 20.
“Although a credit guarantee scheme exists, we plan to establish a corporation with the aid of a Japanese bank. Japan sent analysts to aid us. If SMEs want to borrow money, the corporation will be able to determine the amounts they can guarantee,” he said.
Although the insurance business once thrived in Myanmar, knowledge of how to run insurance businesses was almost completely wiped out when they were nationalized by the Socialist Programme Party in 1964.
At present, the government has granted insurance licenses to 12 private insurance companies in an attempt to transform Myanmar’s insurance sector. Many foreign companies, especially Japanese insurance companies, are opening representative offices in Myanmar and waiting for insurance licenses.
“It is true that SMEs need the money for survival. But this is not their only problem. They face many problems, such as finding customers. Although banks have loaned them money, they still cannot survive, as there is no market for them. Another issue is that despite the loans they receive, many products of SMEs are still low-quality and not lucrative. We need to resolve these issues to capitalise on existing markets. SMEs from other countries face the same problems we do,” said Sett Aung.
Furethermore, impediments to gathering information on SMEs constitutes a setback to their receiving financial assistance.
“If a bank wants to lend money to a company, it needs to gather information on the company. Companies cannot borrow money easily if the bank doesn’t know how much they can trust in the company. In our country, if someone wants to borrow money, they must have collateral. Other countries are not like that. Everyone can borrow money whether they have collateral or not. They can borrow money with project financing. It’s because the borrowers can provide genuine information to the banks,” he said.
Currently, the main obstacles to SMEs’ success are lack of property and lack of financial sources.
Source: MYANMAR TIMES