Japan’s JICA Provides Loans to Support SMEs and Infrastructure in Myanmar
- The Japan International Cooperation Agency (JICA) signed a loan agreement with the government of Myanmar to provide 42.7 billion yen (US$450,200,000) to support SMEs and infrastructure.
- SMEs can apply for up to 500 million kyat (US$381,000) in loans to purchase machinery, build factories, or to make other capital investments.
- JICA is also co-financing the development of the Byago-Kyaikto highway with the Asian Development Bank (ADB). The project is valued at over US$450 million).
On November 4, 2020, the Japan International Cooperation Agency (JICA) signed a loan agreement with the government of Myanmar, in which the agency will provide 42.7 billion yen (US$450,200,000) to support small and medium-sized enterprises (SMEs) as well as infrastructure development.
JICA is a Japanese government agency mandated to providing assistance in the form of economic and social development projects to developing countries. In June 2020, JICA also approved US$46.5 million in low-interest loans to assist SMEs in Myanmar, whereby the funds could be used as working capital or to purchase fixed assets.
The latest loans include supporting SMEs impacted by the COVID-19 outbreak with low-interest financing in addition to providing financing for the East-West Economic Corridor Highway development project.
SMEs represent the backbone of Myanmar’s economy, comprising 99 percent of all businesses and between 50 to 95 percent of total employment.
The latest agreement will see JICA approve 15 billion yen (US$143 million) worth of loans as part of the JICA SME Two-Step Loan program. This program was established by JICA in 2015 with the aim of assisting SMEs in Myanmar.
Through the program, businesses can apply for a loan of up to 500 million kyat (US$381,000) to purchase machinery, build factories, or to make other capital investments. Under the terms of the agreement, 80 percent of the loan must be used for investments in fixed/capital assets and the remaining 20 percent for working capital.
Eligible businesses will need to showcase a valid business license in addition to submitting a profit and loss balance sheet for the previous three years and their future business plans for the utilization of the loan.
The loan can be paid over a period of one to five years and via monthly, quarterly, or annual payments, depending on the nature of the business and the applicant’s’ income. The baseline interest rate is set at 5.5 percent per annum.
Financing infrastructure development
JICA will provide 27 billion yen (US$258 million) in financing to implement the East-West Economic Corridor Highway development project, specifically the Byago-Kyaikto highway. JICA is co-financing the project with the Asian Development Bank (ADB) and is valued at over US$450 million.
The project will connect the Bago Region and Mon State, which lie along the East-West Economic Corridor (EWEC), an economic development program that links Myanmar to Thailand, Vietnam, and Laos. From Myanmar, it is then further connected to India through the India–Myanmar–Thailand Trilateral Highway.
The 62km highway will comprise of four express lanes and thus address current capacity issues on the Byago-Kyaikto, as it only has two-lanes. This will boost connectivity with Thailand — Myanmar’s largest trading partner — as well as other countries along the Greater Mekong Subregion (GMS). The new highway will also include a 2.3km (1.4 miles) bridge across the Sittaung River.