Among recent developments happening in the banking and finance sector, the Microfinance Business Supervisory Committee (“MBSC”) issued Directive 1/2019 (the “Directive”). This Directive lays down a new set of interest rates which shall be followed by all microfinance institutions operating in Myanmar.
Under the new Directive, the interest rate for microfinance loans shall be charged at a rate of 2.30% per month but shall not exceed 28% per year and would be calculated using an effective rate.
The interest rate for compulsory savings as prescribed by the Directive shall be 1.20% per month but shall not be lower than 14% per year, whereas the interest rate for voluntary savings shall be 0.8% per month but shall not be lower than 10% per year.
The MBSC has further stated that for collectables such as fees on loan services, banking services, digital financial services, social welfare, life insurance, membership fees, charges for books and documents, and prepayment service charges, the following shall apply:
- The total collectable fees and charges for loans having a term of 12 months shall not exceed 2% of the loan amount; and
- The total collectable fees and charges for loans with any term less than or exceeding 12 months shall be calculated based on 2% of the loan amount for one year as per the relevant loan period.
This Directive supersedes and replaces all other previous directives, namely those of 2011, 2014 and 2016 which concern interest rates on savings and loans.
While this Directive sets new interest rates, we observe that the Directive came into force on 1 June 2019 but was only published on 5 June 2019. Microfinance institutions which conducted transactions in accordance with the previous interest rates from 1 June 2019 till 4 June 2019 would therefore be in default of this Directive. Given this uncertainty, we expect that the MBSC will issue additional guidance to microfinance institutions in the near future to clarify its position.
Need legal advice?
If you are in need of legal advice or have questions regarding taxation, you can request a quote with DFDL lawyers or get a Quick consult with experienced lawyers. With Quick Consult, from a transparent, flat fee of $49, the lawyers will call you back on the phone within 1-2 days to answer your questions and give you legal advice.
This article is written by DFDL Lawyers.
This article was first published on the DFDL website.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.