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Local banks show no interest in buying credit guarantee insurance

Myanma Insurance Managing Director U Aye Min Thein, sitting beside Deputy Finance Minister Dr Maung Maung Thein, answers queries from local media at the Credit Guarantee Insurance announcement ceremony at the Myanma Insurance Building in Yangon on 28 June.—Photo: Ye Myint
Myanma Insurance Managing Director U Aye Min Thein, sitting beside Deputy Finance Minister Dr Maung Maung Thein, answers queries from local media at the Credit Guarantee Insurance announcement ceremony at the Myanma Insurance Building in Yangon on 28 June.—Photo: Ye Myint

Yangon, 5 Nov— Myanma Insurance has so far received no queries from local banks about credit guarantee insurance, according to an official of the firm.
The state-owned insurer started selling credit guarantee insurance four months ago for the development of the country’s small and medium businesses.
“Up to now, Myanma Insurance sees no application for credit guarantee insurance that was launched last July”, U Aye Min Thein, managing director of Myanma Insurance, told The Global New Light of Myanmar during a recent interview at a conference in Yangon.
Regarding why the insurance is a hard-sell, he said banks seem to be hesitant in taking the risk of lending SMEs without appropriate collateral and providing the lenders with a loan rate higher than the prescribed percentage of loan for the value of the collateral.
The aim of the insurance service is to enable small and medium businesses who want loans from the banks but are without collateral to have financial access and for lenders to mitigate risks, said Deputy Minister for Finance Dr Maung Maung Thein at the credit guarantee insurance announcement ceremony 28 June.
The first insurance piloted in Yangon Region has been on sale since 1 July, but submissions of expressions of interest from banks have not been seen yet.
“Myanma Insurance is ready to sell the product to banks and to research the performance of the businesses seeking loans from the bank”, the managing director said.
According to sources, most SMEs with financial needs are struggling to grow their businesses at a time when only one year is left to go to the advent of the ASEAN Economic Community.
Local business leaders have said the type of insurance is positive for SMEs wanting to get loans from financial institutions and banks seeking risk sharing, but in Myanmar, where there are thought to be more than 80, 000 businesses in still in a situation where it is hard to get a small business loan without putting up property or something else as collateral, the idea has yet to take off. Although no banks have shown interest in credit guarantee insurance, Myanma Insurance is still planning to introduce two new products, health insurance and weather index insurance, during the 2015-2016 fiscal year. GNLM

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