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MCEF to set up lending programme for construction sector

The Myanmar Construction Entrepreneurs Federation (MCEF) is planning to set up a loan programme for members who are in need of capital to start projects.

MCEF chair U Shein Win said the central executive committee (CEC) of the organisation decided on the loan programme because small and medium construction firms were finding it difficult to raise the 30 percent minimum capital needed to start projects won through government tenders.

The country’s construction sector has been in a slump since 2015 with the property subsector struggling to absorb the oversupply, especially for high-end condominiums.

The MCEF will start this programme in the Yangon, Sagaing and Ayeyarwady regions. MCEF general secretary U MyoMyint said the organization would place its own assets as temporary collateral with CHID Bank and would be the guarantor as well as loan provider for its members.

He said the organisation was still planning out the details but reckons that the programme would be rolled out in the next two months.

U MyoMyint added that the maximum amount of the loan would be capped at 30pc of the asset value and the interest would be 3pc more than banks, with the maximum loan term being one year. The interest collected would be placed into a Federation Fund.The standard rate for loans to businesses is currently set at 13pc.

Requirements to get the loan include being a member of the MCEF for at least six months, document showing a successful government tender, recommendations from CEC members and applicants’ track record.

U Shein Win said a framework policy would be adopted to ensure that the loans would be disbursed equally among the states and regions after taking into consideration monthly advice notes.

U MyoMyint said the programme also aims to lessen the number of contractors who run away due to financial troubles. “The MCEFwill conduct due diligence for granting loans without collateral and fix an instalment payment schedule,” he said.

Meanwhile, U MyoMyint said foreign offers for loans to the construction sector, if available, would help contribute to the sector’s growth.

U Shein Win pointed out that the lack of local participation in the construction sector was also due to the high tax rate of 30pc on initial capital investment. “Local businesses face difficulty in providing the investment capital and even if they did, it is uncertain if they can make it back through the profit,” he said.

“We would like to request the government to reform the current tax system for the development of the construction sector,” UShein Win said, adding that the economy would benefit more if businesses were more willing to invest rather than depositing their money in banks.

Source: Myanmar Times

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