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

granted by private banks or direct lending though government-owned special financial
institutions. The strategy should aim to promote SMEs instead of subsidizing them. The
rate of interest charged for loans should be in line with the existing market rate, and
such interest rate should also be liberalized. The objective is to facilitate easy financing
access for SMEs that show development potential. With the support of government, the
situation needs to be changed from unavailable financing to available financing and
then to easily accessible financing for SMEs.
Export-oriented SMEs should be given priority in providing loans, to finance their
activities without collaterals (or at least partial) and backed by state guarantee. In this
way, the government may target industry based on their strategic importance and
export performance. Funds should be made available on long-term basis, should be
business friendly, and require less collateral from these industries, in order to provide
adequate investment for business expansion and growth. The effective risk allocation
system among government, banks, and entrepreneurs should be implemented through
credit guarantee schemes to provide financing for SMEs that show potential for
development.
Second, the government should attempt to boost efficiency of SEEs in some
product categories, where SMEs in the private sector cannot produce efficiently, even as
it speeds up the privatization process of inefficient SEEs in other sectors. It should also
realize that the markets for products that SEEs produce (foodstuff, textile and
household appliance) are already saturated by the proliferation of products from local
SMEs and imported products from neighboring countries. This will lead to a no-win
situation of a head-to-head competition between SEEs and SMEs in the domestic
market. To avoid this situation, SEEs should diversify into products that SMEs cannot
produce efficiently because of technology and capital constraints, such as diesel engines,
personal computers, heavy machineries and equipment, etc.
Third, the relationship between SEEs in the public sector and SMEs in the private
sector is very rare in the form of backward or forward linkages. SEEs have large capital
investments and take the lion’s share of large-scale enterprise niche in Myanmar, while
SMEs dominate the small-scale enterprise niche. These two sectors should be effectively
integrated by means of inter-company relationship. For example, SMEs can serve as
services and input providers or output distributors for SEEs. The public sector
enterprises should only specialize in projects that require heavy capital investment,
high-technology, and specialized skill where SMEs cannot afford to invest in. The
inter-company relationship between SEEs and SMEs should be promoted. Technology
diffusion process between these two should be encouraged. In this way, both will prosper
and the national objective of industrialization will be achieved in the long-term.