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

exciting business ideas cannot execute their plans. This means not only loss of business
and entrepreneurs but also a big loss for the Myanmar economy in general.
Though this problem in financing is common among SMEs in almost all
developing countries, it is more severe in Myanmar due to the aforementioned reasons.
SME owners in Myanmar have to rely on their personal savings, funds from relatives,
and earnings from operation to expand and upgrade their businesses. The size of
business expansion is limited up to the extent of their accessible funds from personal
sources. Or, they have to turn to informal sources of financing from outside money
lenders. Consequently, SMEs pay higher rates of interest, which places them under
pressure and leads to high failure rate.
That is the reason why financing matters for SMEs in Myanmar.
6.1 Current state of SME financing in Myanmar
Specialized researches on SME development in Myanmar are few and only a few
of these give special focus on SMEs financing aspect. Thus, available literatures are
unable to highlight the real financing situation of SMEs.
Financing problems of Myanmar SMEs are rather a complicated issue that has
been in existence for a long time now, in both demand side and supply side. These are
also related to the macroeconomic fundamentals of the country and influenced by the
level of lending infrastructure in the country.
A survey conducted on 167 firms located in Yangon and Mandalay in 2003 reveals
the limited access to formal financing sources (only eight owners borrowed from
state-owned banks and 22 owners from private banks). Inability to access formal sector
financing is one of the constraints of private sector enterprises in Myanmar 59 .
A survey conducted on the firms located in five industrial zones in the Yangon
area 60 shows that out of 182 sample industries, only 78 firms availed of bank loans. The
difficulties in financing involved high interest rate and only mortgaged short-term loans
were available. A similar survey on selected industrial zones in Yangon conducted by the
author in May 2007 also shows that, from the 164 firms surveyed, 87 firms said that
they did not avail of financing from outside sources 61 . They used their own money for
59 See more details: Toshihiro Kudo, Stunted and Distorted Industrialization in Myanmar, IDE
discussion paper No. 38, Oct. 2005, pp. 14-22
60 Industrial Development in Yangon; The Case of Hlaing Tharyar & South Dagon Industrial Zones, a
paper on “Industrial Development in Myanmar (2): Prospects and Challenges” (Toshihiro Kudo (Ed.)
2002), p. 279
61 Aung Kyaw, A survey on SMEs in selected industrial zones in Yangon, 2007 (forthcoming)