Government plans to merge state-run banks to facilitate more lending
senior official has announced that four government-owned banks that have similar business scopes will be merged in order to help provide more loans for micro, small and medium enterprises (MSME), and farmers.
Union Minister of Planning, Finance and Industry U Soe Win revealed this during a workshop on financial support MSMEs in Nay Pyi Taw on Wednesday.
“We will combine the banks that currently serve similar purposes and to do so we will seek advice from the World Bank,” U Soe Win said, adding that the exercise will involve Myanma Economic Bank, Myanma Foreign Trade Bank, Myanmar Foreign Investment Bank, and Myanmar Agricultural Development Bank.
He said that the plan is to first merge Myanma Economic Bank and Myanmar Agricultural Bank in order to modernise a loss-making lending scheme that involved one-year loans at reduced interest rates to farmers.
“We’d like to create loans that are more flexible for farmers. They won’t have to grow just rice so they can freely grow any crop they like, except poppy. The idea is to issue loans based on the crops they grow,” U Soe Win explained, adding that a similar loan system had proven Successful in Thailand.
Bankers from Thailand were invited to the workshop to share their experience and methods.
He said that another effort to modernise lending in the agricultural sector is the formation of credit guarantee corporation (CGC) spearheaded by the Central Bank of Myanmar.
Such an entity would help spread the burden of risk for farmers and business owners who cannot put up collateral.
“For example, the CGC would take up 80 percent of the risk involved in issuing a loan, and the bank will take up the remaining 20 pc,” U Soe Win said, adding that it will take two to three years to establish a CGC in Myanmar.
“I tried to buy a combine harvester through a bank loan last October but it wasn’t successful because the purchase needed so much collateral as well as financial statements. It’d be very convenient if there is an intermediary organisation like a CGC. I hope they form the organisation as soon as possible,” said Ko Myo Lin Aung, a farmer from Pyinmana township. – Translated