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The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian Development

Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee
the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not
necessarily be consistent with ADB official terms.

Status and Issues in SMEs Financing

through Digital Innovation in
Khin San Wai
Assistant General Manager
Myanmar Economic Bank, Naypyitaw
Paper presented to Workshop on How Digital Innovation Can Help Small and
Medium-sized Enterprise (SME) Access to Finance in Asia Organized by ADB
Institute & NCB at Radisson Blu. Plaza Bangkok, on 29-30 October 2018
Turning Points of Myanmar
• Myanmar is currently best described as a country in the midst of a
triple transition –
• from an authoritarian military system to democratic governance,
• from a centrally directed economy to a market-oriented economy,
• and from 60 years of conflict towards peace in the region.
• Driven by reform measures, financial sector is attempting to upgrade
its system and strengthen its capacity.
• Recent innovations in telecommunications enable better access to
financial services through mobile phone.
• SMEs Development Law was passed in 2015 as a significant reform
• Central Bank of Myanmar issued Mobile Banking Directive in 2013
allowing payment over mobile phone.
• By partnering with SMEs, banks can offer mobile banking
application as a quick win approach for SMEs.
Myanmar at a Glance
• Population – 53 million (2014 census)
• Labour force – 22.3 million (2017 est.)
• GDP real growth rate – 7.2 % per yr.(2017)
• GDP - per capita (PPP)- USD 6300 (2017)
• Per capita income/ year – USD 1203 (2015)
• revenues: $9.211 billion
• expenditures: $11.45 billion (2017 est.)
• Bank loan to GDP ratio – about 15 %
• No. of Customer per branches of Bank = 29,387 (2018)
• As of 2016, only 23 percent of adults have access to an
account in financial institutions.
• Sole reliance on informal financial services fell from 10
million adults to 7 million in the past five years.
• Myanmar usage for digital financial services stood at 8%.
Mobile phone use by Myanmar adults
• It jumped from 7% uses in 2012 to over 90%
in 2017.
• Myanmar is the third-fastest- growing mobile
market in the world, after India and China.
• It has an impressive 80 percent smartphone
usage rate. Therefore, Myanmar isn’t simply
mobile ready – it’s already smartphone ready.
• Digital financial inclusion could be achieved
through smart phones.
Service providers for Telecommunication
Mobile operators for whole country
services (voice +data) Internet service providers
Operator Profile Operator Profile
MPT State-owned YTP Public listed co.
Technology -2G/3G/4G Network FTTH service
Market share – 50% Yangon – Mandalay
Mobile users = 28.23 million WIN Wifi service
Telenor Norwegian based Elite FTTH Service
Technology – 2G/3G/4G Yangon
Market share – 34% FTTH Service
Mobile users- 23.75 million Yangon-Mandalay
Ananda/Amera Broadband
Ooredoo Carter- based
Technology – 3G/4G Network
Market share – 15 %
Mobile users- 8.32 million Private sector operators aim for country
wise coverage within five years.
MYTEL Vietnam based
SMEs categories based on SMEs Development Law
Turn-over (Kyats in
Sr. Categories No. of Employees Capital (Kyats in Million)

1. Small
(a) Manufacturing sector Up to 50 Up to 500

(b) Labor intensive Manufacturing sector Up to 300 Up to 500

(c) Wholesale Business Up to 30 Up to 100

(d) Retail Business Up to 30 Up to 50
(e) Servicing Business Up to 30 Up to 100
(f) Except from above Business Up to 30 Up to 50
2. Medium
(a) Manufacturing sector From 51-Up to 300 From 100- Up to 1000

(b) Labor intensive Manufacturing sector From 301-Up to 600 From 500- Up to 1000

From 100 – Up to
(c) Wholesale Business From 31-Up to 60

(d) Retail Business From 51-Up to 100 From 50- Up to 100

From 100 – Up to
(e) Servicing Business From 51- Up to 100

(f) Except from above Business From 31- Up to 60 From 50 – Up to 100

SMEs two-step loan project (Phase I) sector wise
disbursement (MMK Million)

Labor Intensive Whole Sale Retail Sale

Manufacturing Service Other Total
or CMP Sector Trading Trading

Phase-1 No. No. No. No. No. No.

No. of
of of of of of of
Amou Amou Amou Amou Amou Amou End-
End- End- End- End- End- End- Amount
nt nt nt nt nt nt Borro
Borr Borr Borr Borro Borr Borr
ower ower ower wer ower ower

Total 230 45781.75 5 660.00 14 2005.00 14 3434.93 72 16248.80 7 1175.00 342 69305.48
SME Two-Step Loan Project (Phase-1) Disbursement


Services Manufacturing
23% Labor Intensive
Whole Sale
Retail Sale Retail Sale
5% Services
Whole Sale Other

SMEs Loan
• A major SME loan is provided by Japan International Cooperation Agency
• JICA’s loan for SMEs works in two steps. They will first lend to local banks via
the Myanma Economic Bank (MEB). MEB first provide JICA loans to Small and
Medium Industrial Development Bank (SMIDB) to lend (SMEs) entrepreneurs in
three cities (Yangon, Mandalay and Pathein). Later, JICA loan was distributed for
SMEs to private banks through MEB.
• Local banks include SME Development Bank, Kanbawza Bank, Myanmar Apex
Bank, Ayeyarwaddy Bank, Myanmar Citizens Bank & Co-Op Bank. These domestic
banking organizations would have to define terms and conditions for the loans.
• This JICA two-step loan cannot provide loans for various sectors, namely
agriculture, real estate, insurance, gemstone, liquor shops and restaurants,
entertainment and ammunitions, among other industries.
• Present status of JICA loan delivery up to August 2018 is as follow;
SMEs borrower 88 57 45 75 32 45 342
Loan Ks. Million 17198 11444 10210 10505 9188 10758 69305
Loan policy for SMEs
JICA Two Step Loan MEB’s Own Fund loan
• It is MEB deposit-generating
• Loan borrower – 342 loan.
• Loan amount – 69305 Ks. • No. of borrowers- 150
• Interest – minimum deposit • Loan amount- 10599 ks m.
rate (8%) + 0.5 % • Interest – 9 %
• Maximum loan size -500 ks. • Maximum loan size – 300 ks.
• Maximum duration 5 years
• At least 80% to be used for • Maximum duration – 5 years
fixed capital • 50% at least to be used for
• Not allow to purchase land fixed capital
Loans for SMEs & Farmers
• Basis for setting the interest rate for SMEs loan is not to
be under the deposit interest rate which is 8.0%.
• Another determinant factor is the exchange rate which is
not in a stable position. JICA loan has been injected
through the State-owned bank due to the exchange rate
• Although JICA’s two step loan does not cover the need of
the agriculture sector, JICA provides loan through
Myanmar Agriculture Development Bank (MADB) to help
farmers to buy farm machineries and assets through hire
purchase scheme. Interest rate is 8% per annum which is
the same as that for seasonal crop loans.
Credit Bureau
• The credit bureau is a joint venture between the Myanmar Banks
Association (MBA) and Asian Credit Bureau Holdings based in
• IFC, a member of the World Bank Group, has supported the
Central Bank of Myanmar to develop a regulation for credit
reporting. The Central Bank of Myanmar (CBM) issued the
Regulation on Credit Information Reporting System on March 31,
• It provides a basis for the establishment and operations of credit
reporting companies
• This is a key step in building up modern financial infrastructures
that are necessary to improve access to credit for consumers and
SMEs in the country. It will help creditors in risk management,
information asymmetry and control of multiple borrowings. It will
soon relax on over-reliance on collateral. It makes possible credit
monitoring of consumers to manage indebtedness.
• Businessman can apply for a loan from the bank without collateral or
insufficient collateral after he or she has bought guarantees.
• Borrower has to buy full guarantees from Myanmar Insurance that is owned by
the Ministry of Planning and Finance. If the businessman had defaults for many
reasons and the customer could not pay back the borrowed money, the Myanmar
Insurance will return just 60 percent of the loan to the bank. Therefore the bank is
going to take a 40% loss. So risk on CGI is going to be 40% as well. Thus, bankers
said that the system is not fully secure.
• One of the reform plan is to consider the full guarantee process backed up by
Credit Guarantee Corporation (CGC) as adopted in other countries CGC takes full
responsibility and takes action for default payment.
• Myanma Insurance is preparing to set up a Credit Guarantee Corporation,
which could provide credit guarantee to businesses to obtain credit facilities from
financial institutions.
• The Ministry of Planning and Finance has formed a committee responsible for
the drafting of the Credit Guarantee Corporation Law.
Current Status of e-payments
• In order to lessen the handling of currency notes, the Central Bank
of Myanmar encourage to issue debit card and ATMs among the
financial institutions. Later on these network will be linked to ASEAN
payment gateway.
•Myanmar Payment Union (MPU) was organized by state owned and
private banks in 2011. The objective is to upgrade retail payments
from cash-based transactions to card-based, cashless transactions.
• The system is implemented by providing the ATM and POS switching
services among the banks. There is a road map for card issuing and
acquiring process.
• MPU cards have been initially issued in September, 2012. After
2016, more than 1.4 million debit cards had been issued and 1,674
ATMs and 4,072 points of sale terminals have been set up, mainly in
Yangon, Mandalay, and Nay Pyi Taw. As a result, all bank card holders
can withdraw and check their balance and remittance their fund at any
ATM among the banks.
Status of Mobile Banking and Mobile Financial Services

 Mobile Banking Instruction

- In December 2013, the Central Bank of Myanmar (CBM) issued a
Mobile Banking Directive (Directive 4-2013)
- The directive sets a bank-led model, permitting only banks and
financial institutions to offer mobile banking services. Providers are
authorized to offer the following services:
(a) Remittances
(b) Cash-in and cash-out
(c ) Payments made by individuals to a business
(d) Payments made by government to individuals
(e) Payments made by individuals to the government
(f) Payments and transfers between individuals
(e) Microfinance, overdraft, and other financial services
Regulation on Mobile Financial Services for E-Money Issuers
 In March 2016, the CBM release the regulations on Mobile Financial
Services .
- To create an enabling regulatory environment for efficient and safe
mobile financial services in Myanmar.
- This regulations allow non-bank entities to become Mobile Financial
Services Providers (MFSPs) and offer financial services through
agents, including Mobile Network Operators (MNOs) and third-
party players.
- MFSP is allowed to offer the following services :
(a) Opening and maintaining MFS accounts,
(b) Cash-in / Cash-out transactions to/from MFS accounts,
(c ) Money transfer between MFS accounts,
(d) Domestic payments between individuals,
(e) Domestic payments between government and individuals,
(f) Domestic payments between business and individuals,
(g) Domestic payments between business ,
(h) Any other transactions as the Central Bank may authorize from
time to time,
Services of Mobile Banking and Mobile Financial Services
Sr Bank Operation Logo
Myanmar Mobile
1 Innwa Bank 17.12.2013 24.1.2014

2 First Private Bank 30.6.2014 11.5.2015 My Kyat

MAB Mobile
3 Myanma Apex Bank 29.4.2015 1.3.2016

4 Cooperative Bank 13.6.2014 13.6.2014 CB Mobile Bank

663 Mobile
5 Myanmar Citizen Bank 22.5.2015 11.7.2015
6 Myawaddy Bank 13.2.2014 1.7.2016
Mobile Bank

7 Asia Green Development Bank 27.11.2015 15.7.2016 AGD Bank

Shwe (Rural & Urban)

8 2.9.2016 - -
Development Bank
Services of i-Banking and e- Banking

Sr Bank CBM permission Services

1 Ayawaddy 17.6.2014 i-Banking

2 Cooperative Bank 12.8.2014

i-Banking /
3 Kanbawza Bank 26.2.2015

4 Myanma Apex Bank 20.3.2015 i-Banking

i-Banking /
5 United Amara Bank 29.5.2015 m-Banking
Mobile Financial Services

Sr Non – Bank Operation Logo
Digital Money
1 Myanmar Ltd. 28.9.2016 1.1.2017 Wave Money
(Wave Money)
Ooredoo Myanmar
2 26.7.2017 19.9.2017 M-Pitesan
Fintech Ltd

Internet Wallet
3 31.8.2017 7.9.2017 OK $
Myanmar Ltd
Wave Money & OK Money
• An innovative way to transfer money adopted in Myanmar is Wave money

• Wave Money is a joint venture between Telenor and Yoma Bank to provide
accessible, safe and convenient mobile financial services via a nationwide agent
network or via a wave account on your phone. Myanmar clients can receive money
closest wave shop to them.

• MEB conducted pilot scheme for money transfer to pensioners in 2017 and 2018.
MEB plans to have MOU with private service provider.
• MEB also conducted pilot OK$ & Mobile payment pilot scheme with private
company “Internet Wallet Myanmar Ltd. OK$” in 2018 in some regions and states.

• During a survey for digital financial services on 12,000 pensioners in North Dagon
township, only 600 people are able to use Wave Money. “Some are not familiar
with the app. Others don’t want to use,” It is noted.
• Most people are worried about mobile banking and digital financial services, about
their cash disappearing with a single click. A lot of people are using Face book in
mobile phone. But there are very limited number of users of internet.

• Some officials concern about money laundry through wave money transaction.
Conditions of Mobile Banking & Mobile Financial Services

Mobile Agents MFS Agents

Bank MFS

March 2017 March 2018 March 2017

8 Banks 4,553 5,515 3 MFS - 19,584

Peer-to-Peer (P2P) Lending
• It is the practice of lending money to individuals
or businesses through online services that match
lenders with borrowers. The lender's investment
in the loan is not normally protected by any
government guarantee.
• Money transactions takes place online.
• In Myanmar, borrower may seek help from other
entrepreneurs or relatives on Facebook who were
willing to invest in the borrower’s start-up
business. Credit could be then extended via a
peer-to-peer (P2P) lending system.
Weakness & Constraints
Myanmar’s financial infrastructure is still currently in a state of building up several critical components:
such as
Real-time Gross Settlement (RTGS) system,
Centralized Securities Depository (CSD),
A robust card payments network,
An Automated Clearing House (ACH) for retail payments, and
A Securities Settlement System (SSS).
As a result, the processing of payments relies heavily on manual, paper-based processes.

•SMEs entrepreneurs do not know how to use bank services. Even if they know it, they could not take
advantage of suitable financial services products due to limited information available. Directorate of
Industrial Supervision and Inspection (DISI) is now building up Data base for SMEs. DISI started
receiving SMEs cards from on-line application

•Credit reporting system is still lacking and the bank also does not know their credit worthiness.
Evaluation of SMEs performances is difficult due to lack of their financial statement.

•SMEs is the backbone of Myanmar’s economy in terms of number, contribution to employment and
economic output. But it is still stagnant and cannot upgrade in terms of quality and services. This can be
attributed to financing.

•The problem is not the lack of money in the market, but the restrictions that diverts flow of funds away
and limit access to finance to SMEs. It is needed to strengthen Credit Guarantee Scheme, to update
property laws and land registration, to revise property valuation, and excessively cautious banking
regulations, etc..
Way Forward
• Under Public Finance Management Project, MEB is implementing core banking system
since 2015. Private sector is developing this system also.
• The Government has prepared two key guiding documents for the modernization of the
financial system:
• • The Financial Sector Development Strategy (FSDS) 2015–2020
• • The Myanmar Financial Inclusion Roadmap 2015–2020.
• The digital services working group members could be drawn from the private sector, such
as insurance firms, private banks and micro-finance institutions. Such private sector
initiative will allow product by product [one by one] regarding digital finance.
• Banks need technical & operational specialists for risk management.
• There is danger of fraud. Consumer protection is necessary..
• The IT infrastructure and legal framework for e-commerce need to cover interconnection
of telecom and banking services.
• Further steps are necessary to design sound money transfer policies, electronic payment
system and the anti-money laundering policies. Cyber security must be in place.
• Emergence of credit bureau could play its role for facilitating more loan access to SMEs
When credit reporting system is designed and implemented in combination with digital
financing, Myanmar financial sector could scale up SMEs digital financing.
• စိုက်ပျိုးချိန်တွင် အရည်အသွေးကောင်းမျိုးစေ့များသည် ဝယ်လို အားများ

• ပဲမျိုးစုံဆိုင်ရာ အရည်အသွေးမြင့်မားစွာထုတ်လုပ်နိုင်ရေးအတွက
ကောင်းမွန်သည့် မျိုးစေ့စနစ်တိုးတက်ဖွံ့ဖြိုးစေရန် နိုင်ငံတက
အဖွဲ့အစည်းများ၊ အစိုးရ နှင့် ပုဂ္ဂလိကအဖွဲ့ အစည်းမျာ
ပူးပေါင်းဆောင်ရွက်ရန် အထူးလိုအပ်လျှက်ရှိပါသည်။