Improved financial practices crucial for small business

Access to finance is frequently identified as the largest barrier for small and medium enterprises, but often they do not have their own fiscal house in order to receive this finance.

Small and medium enterprises (SMEs) must improve their reporting and accounting framework in order to inspire confidence in banks, according to Thomas Foerch, working on financial systems development with GIZ, a German development organisation.

Strengthened SMEs would give banks more quality lending options, which in turn would strengthen public confidence in banks and attract more deposits which can be used for loans.

Part of the challenge in generating this cycle is to improve the accounting profession, he said at a conference last week.

“You can have the best of frameworks of rules and standards, but is there any kind of negative incentive for accounting professionals when they misbehave,” he said.

Mr Foerch added that there should be controls to make sure financial results are accurate, though in Myanmar a level of adequate control has not been reached.

Still, the accounting profession is still at its earlier local stages.

“In Singapore, you might say that if you throw a stone, there’s a chance you will hit at least three accountants. Meaning there are a lot of accountants,” he said. “And in Myanmar you would have to throw a lot of stones to hit an accountant.”

UK-based Standard Chartered Bank, with support from British Council, has expanded its micro, small and medium enterprises education program across Myanmar.

Last year, the bank began providing material and capacity-building support to British Council trainers to deliver a program called E4E targeted at smaller businesses in Mandalay, Mawlamyine, Taunggyi and Monywa.

Daw Wah Wah Min, an E4E trainer, said management and financial support arrangements, including accountants, are needed to develop SMEs.

While the people who receive E4E training are not necessarily destined to become accountants, their knowledge of business financial statements can be raised, she said.

Many local SMEs do not even keep their own financial statements.

“They just draw costs and profits,” said Daw Wah Wah Min. “They don’t separate personal and business expenditures. So even though businesses are ongoing, they don’t show a profit.” Businesses had often thought that if they had money in hand, their businesses are profiting.

Tina Singhsacha, chief representative in Myanmar of Standard Chartered, said SMEs are the backbone of every developing country, and Myanmar is no different.

Small businesses often struggle with financial human capital and infrastructure, and also financial education. She added it is important to grow the business and financial knowledge of business owners to help their whole enterprises improve.

Source: Myanmar Times

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