Yangon – Due to large percentage of people in poverty, many foreign financial institutes and banks are applying licenses to operate in the micro-finance sector, Vice Minister for Finance and Internal Revenue Dr. Maung Maung Thein said.
“The market for this sector is so huge that many foreign banks are applying for licenses in this sector. Local banks should consider this market seriously. There are risks of course. But if they don’t want to take risks, they’ll lag behind,” said Dr. Maung Maung Thein.
70% of the population in Myanmar are in poverty and needs capital. If local banks can take advantage of this market, they can gain a lot of profits. Although banks are facing nonpayment cases, the percentage of default in the micro-finance sector is less than 1 percent.
Foreign banks that want to set up branches in Myanmar want to operate in the SME finance and micro-finance sector. However, the Central Bank has officially stated that they will be allowed to provide project loans only.
“Local banks don’t have enough capital for SME financing. Also, private banks need to apply for a separate license for this,” said U Kyaw Soe Min, Assistant General Manager of Myanma Apex Bank.
According to some local bankers, the only source of capital for local private banks comes from the deposit money. Also, the cost of reaching out to rural areas for lending is high. Therefore, if foreign banks are to be allowed in the micro-finance sectors, the rules and regulations should be set up systematically.
The interest rate in Myanmar, which is the highest in the ASEAN region, attracts foreigners to the micro-finance sector. Simply by taking loans in their respective countries and then investing the money in Myanmar, these micro-finance businesses can gain a lot of profit.
Currently, there are 6 INGOs, 19 local NGOs, 75 local co-operatives, 5 foreign companies, and 84 local companies—a total of 186—operating in the micro-finance sector in Myanmar.