SMEs need support formalising their business, say insiders

November 1, 2016

With the government seeking deeper engagement with business leaders in Nay Pyi Taw this weekend at a workshop to gain input into the country’s economic policy, Myanmar’s small and medium enterprises are hoping for a policy that encourages greater formalisation of the sector, industry sources say.

 

Some 90 percent of businesses in Myanmar are SMEs, yet only about 50,000 businesses are registered with the SME development department, according to government figures.

 

U Myint Zaw, chair of Ground Solution Development, a company that offers small business training, said that the majority of SMEs are unregistered and lack formal procedures, like correct accounting processing and an understanding of marketing.

 

“Businessmen at Myanmar SMEs do not act within a legal framework and need to support to move from informal to formal businesses,” he said. They need help with networking and developing proper forms of administration. This is important if SMEs are to develop.”

 

Training support to upgrade their business skills is needed, he said. But one of the greatest challenges effecting SMEs was access to finance at a reasonable rate, U Myint Zaw said.

 

Bank loan rates are currently at 13pc, he said. And while there were cheaper loan options available through a Japanese-funded SME loan program with some banks, SMEs needed to be trained up on the requirements for accessing these loans, including applying for a business licence, he added.

 

The government announced last week that it was planning a workshop in Nay Pyi Taw on October 22, where business leaders are been invited to provide input into the government’s economic policy. A 12-point plan was released in July, but many in the business community have been waiting on a more detailed policy.

 

U Myint Zaw said the new policy needed to deepen opportunities for SMEs to engage more broadly with the business community. He pointed to India where the chamber of commerce was a strong support system for the SME community.

 

SMEs could be a great source of entrepreneurship but they need more support, such as stable electricity, as it is costly to have to regularly switch to a generator, to bring their ideas to life said Ma Tin Myat Htet, the client service director at AZURI Creative, a full- service advertising firm that works with many SMEs.

 

‘’I don’t know about the new policy but we need better-quality infrastructure, as currently it makes things very costly for businesses,” she said.

 

A lack of skilled workers was also a concern when trying to remain competitive with a rise in foreign direct investment expected, she added.

 

“We face difficulties with our staff,” she said. “We can’t afford large salaries, so people come and learn from us and then they move to a big organisation that can afford to pay more.”

 

For many at the micro end of the scale, the country’s smallest businesses need greater access to finance in order to grow.

 

“We can’t access SME loans because you need to offer property as collateral and we don’t have that,” said U Thant Zin, a Yangon fruit trader. “And loans from people outside of the banks are very expensive.”

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