Challenges to Small and Medium-size Businesses in Myanmar: What are they and how do we know?

Monday, 24 April, 2017
Kapteyn and Wah (2016) conducted a field study in the city of Yangon, Myanmar to investigate major obstacles to business development in the region. The analysis focuses on three aspects of the business environment that are considered to be top constraints among Myanmar small and medium enterprises (SMEs): (1) access to credit, (2) access to public services, and (3) access to electricity. The authors show respondents (all owners of SMEs) vignettes describing hypothetical businesses facing a particular difficulty, and ask the respondents to rate the gravity of the difficulty. The analysis of vignette ratings reveals that for access to credit, relaxing collateral requirements is considered of prime importance, while access to bank loans is seen as very problematic (equivalent to a 19 percentage points increase in the loan interest rate). Despite their widespread appeal to government officials, donor and business community, SME loans have no discernible impact on perceived access to credit. Access to public services is hampered by cumbersome and time consuming procedures, often necessitating daylong trips to the capital for administrative procedures. Improving such procedures would be equivalent with average annual savings equal to US $4,700 per business. Getting new electricity connections and unreliable electricity supply are perceived by our respondents to be the most difficult in getting access to electricity. As for SME growth, the authors find that growth is more concentrated among firms that have a business relationship with the government. By using anchoring vignettes, they are able to correct for possible differences in response scales across respondents. Although they find some significant differences in response scales across different groups of respondents, their effects on qualitative conclusions are minor, so that the difficulties cited above appear to be perceived equally important across different socioeconomic and ethnic groups. This suggests that a single policy (rather than group-specific policies) aimed at easing a particular difficulty can be implemented across the business population.