On 29 August 2016, the Microfinance Business Supervisory Committee (MBSC) issued several directives (“Directives”) that now allow MFIs to attract funding from deposits and debt-financing. This removes key obstacles that had previously hampered MFIs’ abilities to expand and diversify.
The regulatory changes were in response to requests made by the Myanmar Microfinance Association following extensive consultation between Myanmar based MFIs, the MBSC, the Financial Regulatory Department, along with the World Bank, the Asian Development Bank, UNOPS, and UNCDF. Sections of the new Directives now compel MFIs to employ bolstered client protection mechanisms, and better ensure a client’s repayment capacity when determining whether to grant a loan. For clarity and to ensure that there is no ambiguity, the Directives twice mention the obligation of MFIs to prevent client over-indebtedness.
This article will focus on whether these regulations are necessary. This is in light of several other relevant laws in force in Myanmar with varying and overlapping levels of scope, and whether they will now conflict with the new Directives, leading to multiplicity and greater confusion.
The article also touches upon the prevailing credit market conditions that may place onerous compliance burdens on MFIs in terms of adherence to the new Directives. The article also points out possible measures that regulators should implement to ease the difficulties currently being faced by MIFs in Myanmar.
Issues of indebtedness will also be explored along with the underlying principles of how MFIs stand to benefit from a healthy credit market in Myanmar. Nonetheless, it is better to plan ahead and address certain thorny issues raised by these new Directives, in light of the fact that if all of their provisions are immediately enforced, this may actually impede the goals that they are intended to serve.
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DFDL Contributor:
Nishant Choudhary
Senior Legal Adviser, Myanmar
nishant.choudhary@dfdl.com
