MADB to stick with group-loan structure
MYANMAR Agricultural Development Bank (MADB) will continue to disperse loans using a group-pledge system rather than allowing individual farmers to be responsible for the risk, the deputy minister for agriculture told parliament.
Deputy Minister U Tun Win was responding to a question from Daw Ei Ei Pyone (NLD; Ayeyarwady 8), who asked on October 3 whether there were plans to extend loans to individual farmers.
MADB employs a group-pledge system, where if one farmer fails to pay his or her share of the group loan, the others are responsible for covering the shortfall. In the past, 10 farmers had to group together to apply for loans, although this year farmers can apply in groups of three, an official from the Ministry of Agriculture, Livestock and Irrigation previously told The Myanmar Times.
But if one farmer lets a group down, that group can then struggle to take out new loans, Daw Ei Ei Pyone told the Amyotha Hluttaw session.
‘To prevent the state losing revenue we have to disburse loans using collective responsibility .’
U Tun Win Deputy minister for agriculture
“So, I’d like to know if there is a plan to disburse agricultural loans under an individual responsibility system,” she said, referring to the 2017-18 financial year.
The deputy minister said that farmers had to form their loan application groups with people who would be accountable for their debts. When issuing new loans, priority would be given to groups that had repaid existing debt on time, he said.
“If farmers default on their loans, they shall be punished according to the law,” he said. “But the state still loses revenue. To prevent losing state revenue, we have to disburse loans using a collective responsibility system rather than taking collateral [from individual lenders].”
MADB is the only affordable source of finance for Myanmar’s farming households and struggles to stay profitable. The bank relies on loans from fellow state-owned enterprise Myanmar Economic Bank (MEB) and the country’s Central Bank. But it relies on farmers paying back loans in order to meet it owns debts.
The government recently announced it would place MADB under the finance ministry’s control, and plans to corporatise the bank as part of a reform process.