$1.9 Million Investment by DFID’s to Help Small Businesses in Myanmar
Myanmar Business Tod, 21 Nov 2018
The UK’s Government Department for International Development (DFID) have made an investment of over $1.9 million in a new project they are calling “Shwe Lan”, they plan to transform lending to Micro, Small and Medium Size Enterprises (MSMEs) in Myanmar.
The DaNa Facility, a DFID-funded program is looking to address the lack of financing for MSMEs within Myanmar, with banks typically only lending against real estate as collateral and MSMEs practically excluded from the credit market. This lack of finance has stunted the growth of enterprises that support a large part of Myanmar’s population, including the poor, women and other disadvantaged groups.
Shwe Lan will provide supply chain financing to MSMEs in Myanmar with two main areas of business. First area is by providing MSMEs with access to finance by introducing a ‘merchant financing’product. This part of the project will target MSMEs that act as distributors of some of the largest companies operating in Myanmar. Second, it will seek to provide an ‘invoice discounting’product where MSMEs will be able to confirm orders as collateral for loans.
The long-term goal of the project is to develop a supply chain financing market as an open e-platform for relevant companies in Myanmar. Supply chain financing directly alleviates the strain on the cash flow of a business, allowing companies to accept larger sales volumes and drive stronger growth.
Eleonora Castaldo, CEO of Shwe Lan commented, “We are excited to provide an innovative solution for MSMEs in Myanmar. Our technology and value chain approach allows us to help previously underserved Myanmar MSMEs by offering fast and easy loan disbursement, with minimal documentation and collateral. Our business will change the way the market operates for Myanmar MSMEs. Our vision is to ensure that small businesses have the capital they need to serve their customers and grow their business, bringing prosperity to the country.”
Shwe Lan aims to initially provide access to working capital for 300 MSMEs employing poor people and women, enabling these enterprises to grow and employ further people. The aim is that at least 30% of the enterprises served will be women-owned.
“Small businesses are the backbone of the economy and over 90% of people are employed by MSMEs in Myanmar. By increasing the availability of credit to these businesses DFID are looking to transform their financing and in doing so unlock their potential to grow and thrive. This support will mean more and better paid jobs and increased economic opportunities across the Myanmar economy and more prosperous and secure future for poor people.”Said Dr Gail Marzetti head of DFID.
The introduction of ‘merchant financing’and ‘invoicing factoring’will also enable MSMEs to access credit for the first time, thus bringing innovative practices in the market that can benefit the financial sector as a whole. Once the benefits of these products are demonstrated, Myanmar financial institutions are expected to use it to disburse their own capital and greatly increase the availability of funding sources overall.
Over the medium to long term the project expects to promote equitable development and reduce the inequalities between MSMEs and larger companies and in doing so increase the availability and quality of jobs for poor and disadvantaged people.