This is because establishing a system to collect the required data, much of which has not been prepared or disclosed before, will take time.

“We will face difficulties collecting data during the early stages of launching the credit bureau. So, firms that keep proper accounts or which already have an existing credit profile with the banks will enjoy quicker access to fresh loans,” he said.

In fact, it could take up to five years before the credit bureau is able to collect, analyse and provide the necessary data needed for banks to assess the risks involved in extending loans to firms without any prior credit history, U Kyaw Soe Min said.

To enjoy the benefits of a credit bureau, firms can take several initiatives such as connecting their payment systems to the banks and keeping a record of their accounts and taxes.

“If companies connect their bank accounts to a bank, for example, we will be able to check their accounts payable against the actual payments made, which will make it easier for us to provide recommendations based on the firm’s payment and credit history,” U Kyaw Soe Min said.

The Central Bank of Myanmar (CBM) last week issued a license to Myanmar Credit Bureau Limited, allowing it establish a credit bureau in the country.

The joint venture between the Myanmar Bank Association and Singapore’s Asian Credit Bureau Holdings will be responsible for collecting borrower data and distribute the profiles to lenders such as banks and other non-bank financial institutions.

The lenders will be better able to evaluate the creditworthiness of potential borrowers and improve their risk assessment procedures. Ultimately, it will also enable many entrepreneurs and small and medium enterprises to qualify for loans.

The move arrives a year after the CBM issued regulations for credit-based loans and marks a step away from strict collateral requirements when applying for loans.

Besides not having the collateral needed to take a loan, firms also have difficulties getting new loans if their assets are already used as collateral for existing loans.

“If a borrower already has a K50 lakh loan based on an asset worth K100 lakh, he can get a new loan for K25 lakh from another bank if the credit bureau recommends it. But the borrower must comply with tax, accounting and repayment requirements,” said Dr. Hla Nyunt deputy managing director of Global Treasure Bank.

Source: https://www.mmtimes.com/news/firms-may-need-wait-5-years-enjoy-loan-access-credit-bureau.html