AYA joins pay net­work

The Myanmar Times - - Front Page - HTIN LYNN AUNG MYAT NOE OO

AYA Bank has be­come the first lender to of­fer bank cards with a stamp from global pay­ment net­work provider JCB, which can be used across 190 coun­tries.

SIX com­mer­cial banks have signed up to a two-step loan scheme funded by the Ja­panese gov­ern­ment’s de­vel­op­ment as­sis­tance arm, which will pro­vide sub­sidised loans, guar­an­teed by state-owned Myanma In­sur­ance, to small and medium-sized com­pa­nies.

The Japan In­ter­na­tional Co­op­er­a­tion Agency will is­sue a K30 bil­lion loan at 0.01 per­cent in­ter­est to state-owned lender Myanma Eco­nomic Bank, which will on-lend the funds to six com­mer­cial banks at 4pc in­ter­est.

From Septem­ber, the six banks – AYA Bank, CB Bank, Myan­mar Ci­ti­zens Bank (MCB), Myan­mar Ori­en­tal Bank, Kan­bawza Bank, and Small and Medium In­dus­trial De­vel­op­ment Bank (SMIDB) – will be­gin tak­ing ap­pli­ca­tions for loans from SMEs, pro­vided the com­pa­nies meet strict cri­te­ria.

In dis­clo­sure doc­u­ments pub­lished on the Yan­gon Stock Ex­change last week, MCB said that it ap­plied to par­tic­i­pate in the scheme in Novem­ber last and was se­lected in May.

JICA used spe­cific cri­te­ria in­clud­ing cor­po­rate gov­er­nance, as­set size, num­ber of branches and SME fo­cus in select­ing which banks would join the project, MCB said.

This project is an ex­pan­sion of an ear­lier scheme, said JICA con­sul­tant Jin Yoshida. In Fe­bru­ary the de­vel­op­ment agency is­sued a K4.8 bil­lion loan to SMIDB un­der sim­i­lar terms, and in fu­ture it will con­sider grant­ing an­other loan of K13 bil­lion, he said.

To be el­i­gi­ble for a loan from one of the six banks, busi­ness own­ers must make sure their com­pa­nies meet stan­dards set out by the SME De­vel­op­ment Depart­ment un­der the Min­istry of In­dus­try, be­fore reg­is­ter­ing with that depart­ment.

More than 90pc of busi­nesses in Myan­mar are clas­si­fied as SMEs, but only 25pc of th­ese busi­nesses are reg­is­tered with the min­istry, said depart­ment head Daw Aye Aye Win. “It is not easy to get small com­pa­nies to reg­is­ter, but we want to change this by demon­strat­ing that reg­is­tra­tion will bring ben­e­fits and op­por­tu­ni­ties,” she said.

Once a com­pany has reg­is­tered, it can ap­ply – with or with­out col­lat­eral – to one of the six com­mer­cial banks for a five-year loan of be­tween K15 mil­lion and K500 mil­lion.

Com­pa­nies ap­ply­ing with­out col­lat­eral will be el­i­gi­ble for an 11pc an­nual in­ter­est rate, while those with col­lat­eral will be ex­pected to pay 8.5pc, said Daw Yi Yi Khaing. Both rates are lower than the stan­dard com­mer­cial bank rate of 13pc.

MCB said that it will on-lend at 8.5pc, adding that this will pro­vide a 4.5pc mar­gin – the dif­fer­ence be­tween the in­ter­est rate the bank pays on the MEB loan and the rate at which it will lend – with­out MCB hav­ing to use its own de­posits.

This will help the bank main­tain its loan-to-de­posit ra­tio and liq­uid­ity ra­tio in line with Cen­tral Bank re­quire­ments, it added.

Pri­or­ity will be given to con­sumer­re­lated com­pa­nies in sec­tors such as re­tail and ser­vices, said Daw Yi Yi Khaing.

Loans will not be given to farm­ers, real-es­tate busi­nesses, fi­nance and in­sur­ance firms, pre­cious met­als deal­ers, bars, pubs, amuse­ment and en­ter­tain­ment com­pa­nies ex­cept tourism, weapons com­pa­nies or any other sec­tor harm­ful to so­cial sta­bil­ity, ac­cord­ing to a JICA pre­sen­ta­tion.

Once a bank has re­ceived an ap­pli­ca­tion, it will be for­warded to state-owned Myanma In­sur­ance, which will de­cide whether to in­sure the loan, U Aye Min Thein, head of Myanma In­sur­ance, told The Myan­mar Times.

“We have to in­spect the com­pa­nies sys­tem­at­i­cally against strict cri­te­ria be­cause there are fraud­u­lent busi­ness­peo­ple ev­ery­where,” he said.

If the com­pany passes the as­sess­ment, Myanma In­sur­ance will send a Credit Guar­an­tee In­sur­ance certificate to the bank, which will make a fi­nal de­ci­sion on whether or not to is­sue the loan.

Banks will only be able to is­sue loans if they are backed by Myanma In­sur­ance, be­cause if the SME de­faults, the in­sur­ance com­pany will re­pay the prin­ci­ple.

In re­turn for the guar­an­tee, Myan­mar In­sur­ance will charge com­mer­cial banks 1pc to 2pc of the value of each loan in the first year if the com­pany has col­lat­eral, and 2pc to 3pc if it does not. The an­nual fee will fall each year as the loan nears re­pay­ment.

This com­plex sys­tem is de­signed to get around a strict rule bar­ring com­mer­cial lenders from is­su­ing loans with­out col­lat­eral – a reg­u­la­tion which has stopped credit from reach­ing those who need it most, be­cause many small com­pa­nies do not have valu­able as­sets such as land or gold.

Un­der cur­rent reg­u­la­tions, pri­vate fi­nan­cial in­sti­tu­tions can ac­cept Credit Guar­an­tee In­sur­ance in place of col­lat­eral.

U Ko Lay, chair of the man­age­ment com­mit­tee at South Dagon in­dus­trial zone, said the scheme’s suc­cess will de­pend on the in­tegrity of all in­volved. “We want this plan to be suc­cess­ful, but the banks re­ally need to con­sider which com­pa­nies should re­ceive the money,” he said.

“If they just give loans to com­pa­nies they have a good re­la­tion­ship with, it will not work. On the other side, the in­sur­ance com­pany must be care­ful and busi­ness­peo­ple must be hon­est when ap­ply­ing for loans.”

‘If they just give loans to com­pa­nies they have a good re­la­tion­ship with, it will not work.’

U Ko Lay South Dagon in­dus­trial zone

Photo: Kaung Htet

A worker cleans the area around two cash ma­chines.

Newspapers in English

Newspapers from Myanmar

© PressReader. All rights reserved.