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Credit Bureau Set to Clean Up Financial Sector


Author: Myo Sandar :Some Micro, Small, and Medium Enterprises (MSMEs) take out multiple loans. Data from the new credit bureau will show credit history for potential customers, and aims to reduce the problem.

The Ministry of Planning and Finance, private banks, and microfinance institutions are collaborating on development of the new credit bureau. The government issued a license for the Myanmar Credit Bureau Limited on May 17 this year. The company was jointly established by the Asia Credit Bureau and Myanmar Bank Investment Company.

There are cases in which customers will take out loans from up to four different financial institutions, usually this is the result of either the small size of the first loan and simply needing more capital, or the inability to pay back the first loan. The problem is they often get themselves into financial trouble being unable to pay back the original loan. In such cases, they will take out a new loan from a different financial center to pay off a first loan, and then snowballs into an awful cycle. The lack of a centralized credit data system prevents banks from effectively screening out bad customers or confidently providing good customers the capital they actually need.

“We are working on credit bureau to check history. It may make the process of acquiring a loan for SMEs a bit difficult,” said Dr. Zeyar Nyunt, CEO of SME Development Bank.

In an unusual and desperate stopgap, seven local banks, who provide JICA’s two-steps loans to SMEs, have formed a Viber Group under the guidance of Yangon Chief Minister to share information of potential loan applicants.

“It is easier for banks to check a debtors’ information, but microfinance institutions find it very difficult to check the background of customers, who’s loans range from K30,000 to K100,000,” said Daw Phyu Yamin, Secretary of Myanmar Microfinance Association.

Not surprisingly, there is no effective credit bureau system in Myanmar to date. That is about to change. Banks are set to utilize a new credit bureau in November to address the issue of double dipping by SMEs.