Proper accounts, financial statements, and a solid business plan are challenges for small and medium enterprise (SMEs) that wish to obtain a loan from the bank

The lack of proper accounts, financial statements and a solid business plan is one of the biggest obstacles to small and medium enterprises (SMEs) qualifying for loans, banking officials said at a recent discussion on access to capital organised by MFITRIX, a financial training school.

“When obtaining loans, the banks need to review each applicant’s income and expenditure to calculate the repayment terms,” said Dr Hla Nyunt, deputy managing director of  Global Treasure Bank.

“Local firms are weak in basic accounting processes such as keeping track revenue, expenditure and tax. In addition, their business plans and strategies are not recorded or well-prepared. Without these documents, it is quite impossible for the banks to extend loans to them,” Ayeyarwady Bank managing director U Myint Zaw said.

The government has taken efforts to help local SMEs sidestep high local interest rates and collateral requirements with options such as foreign loans and insurance. 

A much-anticipated credit bureau is also expected to be granted a license to operate soon, which will loan access easier for firms with their books and plans in order, said Daw Khin Thida Maw, manager of International Finance Corporation (IFC) for Myanmar. IFC is cooperating with theCentral Bank of Myanmar to develop the financial sector. So far though, only few have managed to qualify for loans due to the lack of documentation.

Despite Myanmar Insurance introducing a credit guarantee insurance system in 2016, there have only been 300 new businesses which qualified for loans during the period, SME Development Department Director General Daw Aye Aye Win said.

In fact, there have been instances in the past where applicants have modified their accounts in attempts to qualify. “Upon our checks and audits, these firms have been found guilty of fraud, making it impossible for them to obtain loans in the future,” said U Thaung Han, managing director of CB Insurance and CB Securities.

Therefore, local businesses should prepare transparent accounts and draw up a 2-3 year business plan with correct disclosure of assets for easy access to capital, former Deputy Minister for Planning and Finance Dr. Maung Maung Thein said.

(The Myanmar Times: https://www.mmtimes.com/news/accounts-must-be-order-smes-qualify-loans.html )

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