Title Financing Small and Medium Enterprises in Myanmar Author(s ...

Moreover, developing countries can access special aid and loan assistance schemes from
International financial institutions such as the Asian Development Bank (ADB),
International Financial Corporation (IFC), and various international donor
institutions 57 .
Unfortunately, such kind of international assistance is not available to SMEs in
Myanmar. Moreover, most of the above alternative sources of financing are non-existent
in Myanmar. Myanmar lags behind other countries in the ASEAN region in the area of
financing SMEs 58 . The only available sources of financing for SMES in Myanmar are
trade credit, mostly from business-to-business relationship, and short-term loans from
banks that require collaterals consisting of unmovable properties. There are no special
sources of long-term financing that will allow businesses expansion, investment in fixed
assets such as plants and machineries, as well as research funds for product and market
developments and training. Although short-term loans and trade financing can meet
the need for a working capital, equity financing and long-term debt instruments are
more appropriate to finance fixed capital investments, which require longer gestation
periods.
Providing the right type of financing that can match the needs of the SMEs in
each stage of their development is crucial in their survival and growth. Without
appropriate sources of formal financing, SMEs are forced to rely on internally generated
profits and retained earnings that take considerable time to accumulate. The inability
to expand production capacity results in missed opportunities that, in turn, limit the
rate at which firms can grow. The lack of financing could also have widened the gap
between the modern, larger and export-oriented SMEs in leading ASEAN countries and
the traditional, smaller and localized ones in Myanmar.
Lack of financing seriously retards further investment so Myanmar SMEs are
unable to expand as well as boost their competitiveness. With limited access to
financing from formal sources, SMEs with promising products and entrepreneurs with
(www.adb.org/Documents/Profiles/GMS/MPDF.doc). Also, the German Bank for Reconstruction and
Development provided EUR 2.5 million for SMEs in 2004 in Cambodia (REPSF Project 04/003: Final
Main Report)
58 Short to medium term loans are available for SMEs in both Cambodia and Laos where only short term
loan is available in Myanmar. Unsecured loans, leasing and factoring services can also be available in
Vietnam and Laos. In Lao PDR, apart from home, plant and unmovable properties, inventory can be
collateralized at the bank (see more detail- SME Access to Financing: Addressing the supply side of SME
Financing, RAM Consultancy Services Sdn Bhd, Final Main Report, July 2005)