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Getting Credit

At a Glance : Getting Credit

2020 Ranking: 181

2019 Distance to Frontier Score*: 10.00 (unchanged from DB2019)

Regional Average (East Asia Pacific): 58.00

More information on Myanmar’s performance in Getting Credit - Click Here

* The distance to frontier (DTF) measure shows the distance of each economy to the “fron-tier,” which represents the best performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s distance to frontier is reflected on a scale from 0 to 100, where 0 represents the lowest performance and 100 rep-resents the frontier. The ease of doing business ranking ranges from 1 to 190. (Source; World Bank)

What it measures

  • The legal rights of borrowers and lenders with respect to secured transactions, specifically whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. 

  • The reporting of credit information, specifically the coverage, scope and accessibility of credit infor-mation available through credit reporting service providers such as credit bureaus or credit regis-tries.

Why does it matter?

  • Reduced information asymmetries.
  • Greater access to credit for small firms.
  • Better borrower discipline.
  • Support for bank supervision and credit risk monitoring.

 

Legal Rights in Myanmar

  Answer Score assigned to Myanmar in the Doing Business 2020 report
Strength of legal rights index (0-12)   2.0
Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents to security interests in movable assets exist in the economy? No

 
Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description of collateral? No

 
Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of collateral? Yes

 
May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the original assets? No

 
Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? No  
Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an electronic database indexed by debtor's name? No  
Does a notice-based collateral registry exist in which all functional equivalents can be registered? No  
Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third party? No  
Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? No  
Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? No  
Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganisation procedure? Does the law protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? No  
Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Yes  

 

What has improved

Myanmar is actively developing its legal and regulatory framework to bring in in line with international standards and best practices. A lot of initiatives in this respect are being undertaken with the support from international development institutions such as the World Bank, ADB, IFC and others. The main goal set for these efforts is to introduce to make the legal and regulatory system quick, efficient, and transparent.
In 2017 the Central Bank of Myanmar issued a notification allowing for the establishment of a credit bureau
On 20 March 2018 Deeds Registration Law was enacted. The law provides the system of registration of transactions (including security). Mainly focuses on transactions with immovable.
On 17 May 2018 the Central Bank of Myanmar issued a license for the establishment of a credit bureau
The Working Group for the Enactment of the Secured Transactions Law was formed by the Ministry of Planning and Finance on January 14, 2019
On 15 January 2019 the Central Bank of Myanmar issued a Directive number 1/2019. The directive lists out of the differentiative applicable interest rate requirements between secured and unsecured transactions.

The draft Secured Transactions Law has been submitted to the Union Attorney General Office for its legal recommendation in February, 2020 which is a step to submit the bill to the Parliament.

The Insolvency Law which aims to introduce a modern insolvency regime for investors and entrepreneurs was enacted in February 14, 2020. The Law provides the protection of micro, small and medium enterprises by focusing on corporate rescue and debt rehabilitation.

 

Action Plan

Action Item Timeline Status

Adopt a modern Secured Transactions Law

- Secured Transactions Law has been drafted.
- Working Group for enactment of Secured Transactions Law was formed by Ministry of Planning and Finance. In this regard the Working Group is chaired by Director General of Financial Regulatory Department (FRD) under MOPF. The FRD is assigned to take the lead.

 Medium Term [Update required]

Support credit bureau to achieve coverage of 5% of the adult population.

- The contract to develop the system was made between Equifax (software vendor) and Myanmar Credit Bureau.
- Myanmar Credit Bureau can start the business in October, 2019
- After the system establishment, a data survey can be done to establish whether the Credit Bureau covers 5% of the adult population.

 Long Term [Update required]
After the Secured Transaction Law has been passed, put in place a collateral registry Long Term [Update required]

 

Lead Person

Daw May Toe Win

The Getting Credit Indicator Support Group is headed by the Director General of the Foreign Exchange Management Department, Central Bank of Myanmar

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