A prominent Economist recently argued that Myanmar’s small to medium-sized enterprises (SMEs) require new funding options, to thrive in a competitive global market. Htet Tayza comments.
According to official data, there are 126,237 registered SMEs in Myanmar, accounting for 99.4% of the nation’s companies. These firms need to be able to access financing, in order to grow and boost the country’s economy. Professor Aung Tun Thet, an Economist and an Adviser to Myanmar’s Federation of Chamber of Commerce and Industry, recently spoke on this issue at the Myanmar Banking and Finance Conference 2016, which was held in Yangon between 28th and 29th June 2016.
Tun Thet noted that Myanmar’s SMEs play a vital role in the nation’s economic development. These businesses generate significant domestic and export earnings for Myanmar, he continued, meaning that they are a large contributor to the country’s innovation, growth, investment and employment creation prospects. Therefore, the professor argued, Myanmar must ensure that SMEs have the financial tools needed to grow, so they can further aid the nation’s economic expansion.
New financing options
Amid fierce competition for imported products, he suggested, Myanmar’s SMEs often depend on bank credit to receive vital expansion capital. The professor added that Myanmar’s SMEs are now facing credit constraints, which need to be resolved so these companies can become successful. Elaborating, he was quoted by Nation Multimedia, an independent Thai newspaper, saying:
“Most of our SMEs are under pressure from cheaper imports and foreign competition. They are constrained by non-competitive exchange rates, cumbersome bureaucratic procedures, the poor state of infrastructure, lack of effective institutional structure, and limited access to finance.”
Tun Thet proposed a number of alternative financing solutions. For instance, he suggested that Myanmar’s government should allow SMEs to back business loans with assets such as real estate, equipment, machinery, inventory, and accounts receivables.
Going further, the professor argued that Myanmar’s SMEs have a limited understanding and awareness of the alternative financing vehicles available, restricting their ability to expand. Proposing a solution, Tun Thet suggested Myanmar implements the supportive financial infrastructure and regulatory framework required to ensure SMEs can access funding and maintain long-term stability.
Htet Tayza’s commentary
The Asian Development Bank recently forecast that Myanmar will be the fastest growing Asia-Pacific economy in 2016. SMEs comprise the vast majority of Myanmar’s businesses, so its government must ensure that it is easy for these companies to conduct business in order to tap into this considerable economic potential. However, Tun Thet makes a valid point; Myanmar’s SMEs are limited by a lack of, as well as limited understanding of, how to utilise alternative financing options to fund expansion.
How should Myanmar address these issues, to ensure SMEs can access essential financing? The measures suggested by Tun Thet hold weight, as they will provide Myanmar’s SMEs with the regulatory support required to accrue vital business capital more easily. I would also suggest, however, that Myanmar should also capitalise on the fast-emerging Asian financial technology (fintech) revolution to ensure its SMEs can access new expansion capital.
New fintech-based solutions are increasingly making it easier for Asian small businesses to attract fresh investor capital. For example the Association of South-East Asian Nations (ASEAN), of which Myanmar is a member, is currently considering creating an SME crowdfunding platform. With crowdfunding, SMEs can access a wide range of investors at minimal cost. By utilising fintech, Myanmar could supply its SMEs with alternatives to traditional bank loans, making it easier for them to access the expansion financing they need to power the country’s economy going forward.