Myanmar is planning to secure loan of $100 million from the World Bank, with discussions currently under going at the parliament and to be approved in the name of development of the financial sector. The funding is to be split between the Ministry of Planning and Finance and the Central Bank of Myanmar – with $75 million and $25 million respectively as a 38 years interest-free loan.
Splitting up the fund, $60 million of the Ministry’s share will be used for normal expenditures, which includes staff salaries and other working capital purposes.
About $7 million is to be used for providing technology support expanses for the restructuring of four state-owned banks, $5 million for the development of the laws, regulations of the microfinance, insurance works and the upgrading of the IT sector in those fields and $3 million is for the use of the training and capacity building of Ministry staff working on the project.
Among the $25 million for the Central Bank, $6 million is for the opening of the school to teach finance related courses including capacity building works, $2 million for IT, capacity building and financial management work, $15 million for the development of payment systems and $2 million to build capacity of staffs handling the project.
The loan will be interest free but could have a service fees of 0.75 percent. The proposal to secure the loan from the World Bank was submitted by the president to parliament on 5 August 2016.
There are also different views on the proposal in the parliament regarding this loan. The final decision on the loan is to be made at the next parliamentary session sometime in August.
As the vast majority of Myanmarese enterprises – 99.4 per cent – are small and medium enterprises (SMEs), alongside the existence of many other unregistered small businesses, by providing stronger financial support and easing access to capital, Myanmar could see the proliferation of small businesses and higher tax revenues generated. said Dr Thet Thet Khine for Dagon constituency in a parliamentary address.
“To brighten up the economy, the banking and microfinance sector needs to see development,” said Khine, supporting the proposal.
According to Khine, in Myanmar the loans issued for the private sector in 2013 reached 12.7 percent of the GDP. This has room to increase, with rates of 37 per cent in Laos and 42 per cent in Cambodia by comparison.
Currently, 70 per cent of Myanmar’s residents are unbanked, with plans regarding the development of the financial sector lacking clarity on what percentage of the population could be provided access to banking services through the development work said Aung Hlaing Win from Mingalardon constituency.
“The reason for local banks not having a good service is due to not having a competition in the market,” said Hlaing, adding that currently there are no foreign banks engaged in retail banking, unlike neighbouring countries which are seeing such competition. Hlaing argued that only if Myanmar’s finance ministry could provide a robust rationale for securing the the loan should it be approved.
“We don’t need an aid loans. We need investment from multinational corporations,” said Than Soe, No 4 constituency of Yangon Region.