Myanmar's Small Businesses Targeted by World Bank Lending

World Bank Arm to Provide Financing for Capital-Starved Enterprises

by Shibani Mahtani, - September 16

NAYPYITAW, Myanmar—The International Finance Corp., the World Bank group's private-sector arm, will provide Myanmar's Yoma Bank with a $5 million loan to help finance capital-starved small and medium-sized enterprises in the country.

The loan is the first initiative dedicated to helping smaller businesses in Myanmar, where local entrepreneurs complain of being deprived of bank loans and left behind by the country's economic reforms, which have so far focused on developing infrastructure and rewriting laws to primarily benefit foreign investors.

Yoma Bank will serve as a "true SME bank," said Serge Pun, a Myanmar businessman who controls the bank and chairs Singapore-listed Yoma Strategic Holdings, at a news conference Friday. The bank will "have to do a lot of risk-taking" but is ready to start the process of lending right away, he said.

Access to capital is one of the biggest hurdles facing small businesses in Myanmar, a so-called frontier market whose economy is largely controlled by conglomerates and the former military government.

Eric Rose, an attorney with Herzfeld and Rubin P.C. who advises clients on the country, estimates that 70% of the economy is connected to businesspeople on the U.S. Treasury Department's "specially-designated nationals"—a blacklist of cronies linked to the former military government—or is directly controlled by the military itself, leaving little room for small businesses.

The IFC may increase the loan to Yoma to $30 million in the next few years, and is planning similar partnerships with other local banks, said Vikram Kumar, the IFC's representative in Myanmar, who announced the partnership on the sidelines of the Myanmar Global Investment Forum in Naypyitaw.

The IFC aims to boost development by engaging the private sector and helps finance private entities. It entered Myanmar last year, when the World Bank Group cancelled debt owed to it by the country.

Five to 10 banking licenses will be handed out to foreign lenders in coming weeks, according to Set Aung, deputy governor of Myanmar's central bank. This has pushed the country's domestic banks to become more competitive and re-position themselves to support local businesses, experts say.

Mr. Set Aung said previously that local banks, fearing that they won't be able to survive the competition, have lobbied for increased restrictions on the entry of foreign banks.

The partnership announced Friday, though, shows that "if you are up to international standards, the sky is the limit."

99B Myay Nu Street, LAMAI Condo, Suite 6D, Sanchaung Twp., Yangon 11111, Myanmar - Phone: +95 1 230-5935
©2015 Herzfeld Rubin Meyer & Rose Law Firm Limited. - Legal Info