- By Shin Min and Hmwe Kyu, Photo: Aye Than
Financing Agricultural Sector and SME Sector in Myanmar was the Myanma Radio and Television’s broadcast on the Round Table Discussion in which panelists U Maung Maung Win, Deputy Minister for Planning and Finance; U Min Thu, Managing Director of Myanma Agriculture Development Bank; U Win Naing Oo, General Manager of Myanma Economic Bank; U Khun Aye Naing, Deputy Director-General of Agriculture Mechanization Department talked about the topic in some detail.
The discussions were as follows.
Moderator: First of all, the Deputy Minister for Planning and Finance may kindly explain on the plan and policy of Financing for the Development of Agricultural Sector and SME Sector in Myanmar.
Deputy Minister: The Ministry of Planning and Finance is financing through the MEB Two-Step Loan for the development of Agricultural Sector and SME Sector. The State has been encouraging the development of private sector as well as SME Sector and Agricultural Sector. In supporting these tasks, SME Development Central Committee and Working Committee are being formed and the committees are chaired by the President and the Vice President. The private sector Development Committee is headed by Vice President. Various Committees are being formed for the development of SME Sector and Agricultural Sector. Sub-committees are also being formed respectively for the smooth functioning of the loans and financing processes.
The State has laid down economic policy which stipulates the all-round development; the food security; elevating socio-economy of the people through the balanced economic development paradigm of agriculture sector, breeding sector and industrial sector. Similarly, another policy is also laid down for the sustainable development for the farmers and the economy that could maintain stability of finance and monetary system. In accordance with these policy and plans, more financing is available for the SME sector. More financing in broader aspect is being accorded to the agriculture sector.
Moderator: Kindly explain the aims, objectives and plans on the loans and financing to the farmers by the Myanma Agriculture Development Bank.
U Min Thu: Myanma Agriculture Development Bank is generally known to the public as a bank with the capacity of facilitating cultivation loans. Our bank is serving two main functions. The first part is banking and the second part is customer service. On the part of banking, there are laws to abide, which has three main features. These three laws are namely the Law on Myanma Agriculture Development Bank; the Law on Land Affairs; and the Law on Farmers Interest Protection and Promotion.
The main aims and objectives of the three laws are to aid and finance the farmers and the business people who are working in the agricultural sector and animal husbandry sector. Our bank is fulfilling these duties and objectives in multi-faceted ways on the part of the banking sector.
Another sector is about customer sector and has been communicating with the customers in three categories.
The first category is the traditional farmers who work on manageable scale on small land plots of under (10) acres. There are farmers who hold larger land plots with more than (10) acres and work on their own. In addition they work for other land plots with their machineries that they have invested. They are the farmers who jointly work for agriculture as well as animal breeding.
Another category is not farmers, but business people engaging in agriculture and animal breeding, and they are our customers. With regards on the loans and financing, we consider the trends of past successive distinct periods on the investment flows of the business. The number of farmers working on less than (10) acres is accounted for (17) millions in net acreage. The number of larger land plot holders accounted for (20) millions in net acreage, and our banks have no resources of cash to provide them. Our bank is using the resources of cash as cultivation loans for small farmers and the money came from the saving of the general public at the Myanma Economic BPank.
This is the loan being provided on the basis of seasonal crops cultivation to be repaid at the time of harvest by the farmers. When we have provide loans to the small farmers, certain questions often arise whether there are possibilities to facilitate cultivation loans to larger farmers. We have to consider how we could help them financially.
Based on the consideration of state policies and directives and the instructions of the Ministry of Planning and Finance; we evaluated the short term, medium term and long term loan schemes for investment in their agricultural production scheme. As a result, the JICA’s Two-Step Loan Program has emerged under the Myanmar-Japan government to government cooperation project.
As the cultivation loan and the JICA’s Two -Step Loan Program have been facilitated to the cultivators, both the small farmers and the larger farmers could enjoy the loans. The loan has been extending to the farmers and breeders as well as the agro-related business people. Therefore, financial inputs have been directed to the agricultural sector as well as breeding sector. When we think about the ways and means, the MEB’s Two -Step Loan has appeared under the guidance of the Ministry of Planning and Finance with the cooperation of Myanma Economic Bank. This loan scheme namely MEB’s Two Step Loan covers to farmers as well as agriculture related business people.
Therefore, I would like to say that our bank is extending loans to small scale farmers, the large scale farmers, and agro-related business people with three types of loans namely the cultivation loan; the JICA Two -Step Loan; and MEB Two -Step Loan.
Moderator: Kindly elaborate the policies and objectives for the SME sector development.
U Win Naing Oo: Our Myanma Economic Bank is shouldering the task as the State Bank on serving as commercial banking functions in addition to the tasks entrusted by the policy of the State. The tasks include the SME development plans as directed by the State. In every country, the SME stands out as important entity for the economic development as well as private sector development. In the developing countries as well as developed countries, the SMEs are referred as the Key Driver of the economic development. Therefore, the governments in many countries are extending assistances in many ways for the development of the SMEs. There are many factors in the development of the SMEs, and that the most important requirement is to get financial investment and the access to finance. In general terms, it is found that the majority of developing countries are encountering in garnering financial investment from the conventional banks.
It is due to the reason that the SMEs are mostly new businesses and they have no adequate guarantees. As they could not put up adequate guarantees to the banks, they could not enjoy sufficient financial investments. As they could not get enough investment, they have to seek loans from outside sources with high interest rates. The SMEs are in need of loans with medium term repayment such as minimum three years or five years as they could not afford short term loan within one year.
When such loans could not be handed out by the conventional banks, the Two-Step Loan has emerged under the Myanmar-Japan Cooperation Plan. At this juncture, I would like to clarify who could enjoy this loan scheme as all SMEs could not get the Two-Step Loan.
Majority of the SMEs are formed in various structures, and the SMEs are supportive in helping and their contribution to the development of the state economy. Therefore, they deserve for being selected for access to loans. In doing this, the SMEs must be in accordance with the SME related laws. Development loans are to be extended to the sphere of SMEs such as the production business, the labor intensive business, the retail selling business, the wholesale business, and the service business.
Financing policies have been laid down and the loans would be attached with interest rate of 8 point 5 percent and loan term of one-year to five-year for the owners of SMEs who are actually in need of loans.