- By Shin Min and Hmwe Kyu, Photo: Aye Than
Continued from previous article covered on 22 October
U Min Thu: The MEB Two-Step Loan has started since April 2018. Up till now, a total of 138 farmers and business people have already taken out the loans. The plan covers 32 townships in 10 regions and states. Under the scheme 1500 millions Kyats were provided and more financing for the pipeline. With the approval of the ministry, a survey is underway with arrangements between the Myanma Insurance and a Singaporan company to launch insurance scheme on buffaloes and cows. Microchips are attached to the animals and the survey is going on. If the project is successful, loans would be given out on the guarantee of the animals and the risk of bad debt with the bank would not be there. If this project could be realized, the financing could be fulfilled and the animal breeding industry would be developed. The scheme would be beneficial to the farmers, the bank, and the state; and therefore we are expecting very much.
Low interest loan
Our bank is trying to raise funds for adequate lending. Starting from this year, we have asked the farmers to save one percent of the total loan that they have taken out. For example, when we are giving out (2000) billion Kyats loan at least the saving might remain (20) billion Kyats in each year. This is the way to raise the deposits in the bank. Similarly like JICA, we are planning to get soft loans from international organizations. Another way is to cooperate with the local and foreign banks and international organizations. If we could realize this plan, we would be able to rely less on the MEB. We believe that we could be able to stand on our own, and then become a bank that could finance the agriculture and breeding industry. The farmers as well as agro-based business people may contact the Branch Bank of Myanma Agriculture Development Bank and get the appropriate loans.
Moderator: Please explain about the SME sector being financed by the Myanma Economic Bank so far. What is the future plans regarding the loans.
U Win Naing Oo: Since our bank is State-owned bank, we are financing the SMEs. Financing under the SME Two-Step Loan has started in 2015 and that 2017-2018 has witnessed the completion of Phase-1. In the Phase-1, the loans are being handed out to export – oriented businesses in accordance with the SME law which is in line with the development of the State.
In the work process, the Myanma Economic Bank has acted as Executing Agency and systematically chosen the Participating Financial Institutions, and given out loans to the SMEs. We take loans from the JICA of Japan. These loans were being systematically handled through the financial organizations and monetary organizations. We have disbursed through six banks namely Participating Financial Institutions in the Phase (1). The Phase (1) has been completed with the total amount of 69 billion Kyats, and that the Phase (2) is coming on its way. Before starting the next loans, we would evaluate and assessed whether the SME loans are cost effective or otherwise in broader aspect. In the first Phase, we have a low level of experience. Due to the lack of experience, the Participating Financial Institutions –PFI namely the banks based in the regions and states have given out loans to their associates and closer organizations and companies. At the same time, they have mainly chosen less risky SMEs and companies that could provide guarantees to avoid bad debts.
The loans are being facilitated in larger towns of the regions. Yangon, Mandalay and Ayeyawaddy Regions enjoyed most of the loans, and the remaining regions and states have not been covered so far. It is therefore, plans are underway to provide financial supports to other regions and states at the Phase-2 on a broader scale. In the first Phase, the majority of SMEs that received the loans were money lending business that has been functioning well. At that time the new startup businesses have missed the opportunities to get the loans, but they would be financed for the second Phase.
In accordance with the nature of banking procedure, the new startup businesses were deprived of as they are still in uncertain situation. On the other hand, priority has been given to the businesses that could deposit guarantees. Most of the SMEs are not in a position to provide guarantees. At the second Phase, broader aspect would be applied to provide loans. The Phase–2 is being approved by the government and the Hluttaw, and therefore, loans could now be delivered.
In the Phase–2, the amount to be financed would be tripled than the Phase -1, amounting to 180 billion Kyats. The selections would be made among the experienced branch banks and those Participating Financial Institutions that have networks to handle the matters. One special factor was that in the Phase–1, the Myanma Economic Bank had never acted as the Participating Financial Institutions – PFI in the direct financing tasks to the SMEs. In the Phase-1, it remained as Executing Agency for project controlling. In the Phase–2, it would become Participating Financial Institution, and have planned to deliver loans to the SMEs. It is due to the reason that there are over 330 branch banks in the whole country, and that we are serving loan disbursement through the branch banks. All the branch banks have the banking experiences for many years. By taking this strength and expertise, we would participate in the financing tasks as the Participating Financial Institutions – PFI in the regions and that states so as to serve effectively in the project.
In the Phase-2, we have the objectives to offer financing in a broader approach in the regions and the states than the Phase-1. We intend to provide loans to new startup businesses. If and when the SMEs have no adequate guarantee, then we would negotiate with the Myanma Insurance in securing the “Credit Guarantee Insurance” system and would provide loans in broader sense.
Coordinator: Kindly explain the tasks of the Agriculture Mechanization Department in the agriculture development program in the context of the JICA Two-Step Loan, including the future tasks.
U Khun Aye Naing: As our task is to transform Myanmar’s agriculture into agriculture mechanization, we have two tasks namely the application of more agricultural machinery and the elevation and enhancement of land utilization. Both the tasks need financial aids. We are indeed very happy on behalf of the farmers to have the chance to converse with the financial aid agencies and organizations. When the farmers gain possession of the agriculture machinery, they are a bit scared in hardling new devices. On our part, we trained and showed them the way how to apply practically on the machinery with safe methods without harm or danger.
Translated by UMT (Ahlon)