Microfinance firms in Myanmar struggle to stay afloat in second wave

Government travel restrictions and orders to defer repayments and lower interest rates on loans due to COVID-19 have reduced the ability of Myanmar’s microfinance companies to help rural people who desperately need capital. The inability to collect repayments from borrowers has hurt the companies’ liquidity and cash flows, limiting their ability to make loans. The Planning, Finance and Industry Ministry’s Microfinance Business Supervisory Committee overseas about 190 companies with 4.6 million members, most of them low-income.

The country hit by a second wave of COVID-19 infections, Daw Phyu Yamin Myat, general secretary of the association, shared her views on the challenges facing microfinance companies. They are following the Health and Sports Ministry’s guidelines and practicing social distancing as much as possible at their offices. Few clients can repay their loans. They cannot recover the money if the clients cannot repay their debts. The amount of money available to us has become less and less as they have loaned money to people who cannot make repayments. They think if people get back to work, the situation will improve and they will not have large losses. They are in semi-lockdown or lockdown, which can interfere with work.

Microfinance companies have not been able to grow during this time. All have been badly hit. If they compare business expansion with population growth, the development ratio is zero. Over 40 of the 200 financial companies are practicing corporate social responsibility under some of the government’s plans. There has been no damage to microfinance firms yet, but it could happen at any time. The lending of money to businesses is essential. Although there is an income stream from repayments, the companies might have other problems. They haven’t fully recovered loans from our clients. A business going belly-up might set off a chain reation, so they should advise their clients to consult with the association if they have problems.

Source: Myanmar Times

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