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

Myanmar Investment and Commercial Bank, and Myanmar Industrial Development
Bank are examples). They offer loans to their respective targeted industry, but the scope
is very limited and long-term loans are not available. In this regard, development
financing that specializes on SMEs to fulfill long-term funding needs is urgently needed
in Myanmar. Developing specialized SME financial institutions like the SMEs Bank of
Thailand and JASME in Japan to facilitate SME financial requirements in all stages is
a recommended.
Too much regulation by the central bank in both structural and operational
aspects of the commercial banks impedes bank efficiency in terms of SME financing.
The banks cannot determine interest rate on their own based on the characteristics of
borrowers or borrowing businesses. Loan granted to businesses largely depends on the
quality of collaterals. The quality of business is not an important consideration. Once
loan decisions have been made, interest rate is the same across all borrowers,
regardless of their reputation or creditworthiness or if they are regular customers. Only
skill that can assess the value and quality of collateral property is enough to
successfully run banking business operations. This can hamper the ability of bank
employees in making systematic credit assessment. Therefore, each existing regulation
should be thoroughly analyzed to remove those that impede the efficiency of banking
operations. Private Banks should be allowed to implement their own risk management
system if they meet predetermine performance criteria. The central bank should focus
on the surveillance of the efficiency of the whole financial management system and on
taking prudential views on any problematic issues in the banking business. It should
not focus on the details of the operational aspects of commercial banks. Efficiency of
banking operations and competition in the banking business should be encouraged.
Promoting new lending technologies, credit assessment skills, diversification on loans,
and credit to preferential sectors should also be made. The central bank should also
encourage private banks to reduce full reliance on collateral-based lending practices.
Private Banks should be allowed to serve other credit facilities, such as factoring, export
and import financing, and leasing. And also they should be allowed to make long-term
loans to promising business sectors.
Capacity-building programs for private bank personnel should be fostered to
accommodate the changing nature of banking operations and offer new services. Credit
assessment skills on business proposals and financial statement should be developed
and nurtured.
Private Banks should develop closer ties with the SME sector and do away with
insensitive banking procedures. They should keep an SME database and learn how to
utilize such database in making decisions for new loans. Bank personnel should be