In Myanmar, Microfinance Stagnates Due to Tough Rules
Monday, March 30, 2015
A microfinance law was passed in November 2011, one of the first new pieces of legislation brought in by the civilian government. The industry had previously been closed to all but a handful of institutions, but following the law a number of international players entered and local organisations began looking at expansion.
Yet much of the early excitement around the potential for microfinance has been held in check, as cumbersome regulations have meant the industry is growing much slower than many would hope.
Acleda is one of the large foreign organisations that entered in the wake of the microfinance law. The Cambodian firm, which transformed from an NGO to becoming Cambodia’s largest microfinance institution (MFI) and bank, has had a Myanmar presence since early 2013.
Acleda Myanmar managing director and CEO Kim Bunsocheat said that while it is able to offer the small-scale microfinance loans on a limited scale, it has so far been unable to borrow from abroad to fund an expansion of its services.
The problem is not on the business end – a number of well-known organisations such as the International Finance Corporation (IFC) and Blue Orchard have discussed extending financing to Acleda – but rather that the loans are not being approved by the Central Bank of Myanmar.
“We are told our interest rates can’t be above 8 percent for dollar loans, 10pc for Myanmar kyat loans, but it is hard to borrow at these rates from creditors from abroad,” he said. Acleda’s rules mean nearly all of its borrowing must be in local currency.