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

There are some additional lending programs sponsored by financial institutions and
governments and which are designed to enhance SME financing requirement such as
import trade financing, export trade financing, credit guarantees, government subsidies,
venture capital, and securitization of loans. Although most of these methods originated
from the United States and other Western countries, they are widely used in Asia and
some ASEAN countries like Japan, Singapore, and Malaysia. The five
transactional-based lending technologies involve financial statement lending, small
business credit scoring, asset-based (collateral-based) lending, factoring, and leasing 69 .
Relationship-based lending technology is designed to address information
problems that are not feasible or costly, cannot be effectively solved by transactional
lending technologies, and most likely to be found in the environment with poor lending
infrastructure. Under this technology, the primary information used by lenders is based
on the soft information about the borrower. Such information is largely generated from
the close relationship between the lender and the borrower. Relationship lenders collect
information beyond that which is available in the company financial statement. The
lenders acquire such information as proprietary information and make the loan decision
based on it. Because it is labor-intensiveness in nature, relationship lending is likely to
be more costly than transaction-based lending technology. These costs may be passed
onto the borrowers in the form of higher fees and higher interest rates. However, in
Myanmar where interest rates are strictly controlled by the central bank, such practice
of passing on these costs is not possible.
Trade credit is a widely available form of SME financing especially in an
environment with weak lending infrastructures, as in the case of many developing
countries. Soft information and mutual trust between borrowers and lenders play a key
role in trade credit. Trade credit is particularly important in economies with weak
financial systems. Figure 3 shows the spectrum of lending methods available for large
and small financial institutions based on the type of environment.
69 Ibid.