IFC will extend from $3 million to $6 million financing to each selected MFI as a kyat-denominated loan. The move will deepen access to finance to the bottom of the pyramid market.
The move will also enable the microfinance industry to commercially operate in the country.
The IFC loan is expected to enable disbursal of 112,500 to 127,500 loans to low income households in the country, improving the underserved segment’s access to finance and create jobs, according to the IFC disclosure.
“Microfinance in Myanmar has grown up on a lot of donor funding. IFC is trying to help formalise the sector and provide sustainable local currency debt to MFIs to expand their loan portfolios,” said Julie Earne, Lead, Financial Institutions Group of IFC in Myanmar.
IFC is working across the financial sector with banks, microfinance institutions and digital finance companies to ensure all segments of the market are served.
IFC stated that there are about 250 microfinance institutions in Myanmar that are yet to commercially operate. The proposed loan facility will provide the scarce and much needed commercial funding to those institutions. It is also into providing advisory services to the candidates to build internal capacity.
Some of IFC’s existing microfinance clients include Acleda, Fullerton, Proximity Designs, Pact Global Microfinance Fund (PGMF) and VisionFund Myanmar.
“We are looking at our existing investment and advisory relationships (on microfinance), as well as other clients that we were not working with yet, to put together a diverse group of institutions,” said Earne.
IFC is currently in the process of reviewing the MFIs for participation in the debt facility.
Back in 2014, the IFC launched The Myanmar Microfinance Development Programme with the funding support from the Canada Department of Foreign Affairs, Trade and Development and funding from Livelihood and Food Security Trust Fund (LIFT). It expects to improve financial access for over 270,000 clients with an aggregate loan of over $70 million by 2017.
“Our existing programme provides technical assistance focused on formalising microfinance institutions, building capacity in treasury management, human resources, risk management, product development, assisting key players in the market to mature as they look to grow and scale their operations,” said Earne.
Building on this programme, IFC is supporting MFIs to borrow local currency Kyat funding.
“Right now the most critical issues for microfinance in Myanmar is to help facilitate local currency financing to MFIs so that they can expand their portfolios. We need to also crowd in and enable local banks to lend to MFIs. Local banks have kyat liquidity and it is important to facilitate them to lend to MFIs,” said Earne.
The Central Bank of Myanmar just issued a mobile financial service rules and telecom operators like Telenor are in talks with some MFIs to use their mobile financial service for microfinance lending.
IFC is engaged in the MFI operations for Myanma Awba, an agri-based business in Myanmar, in an advisory role, giving corporate governance assessment and drafting and implementing policies and training. Myanma Awba received a finance facility of $10 million in February 2016.
IFC has been active in debt and equity investment to Myanmar corporations. Some recent involvements include a $-million support for Myanmar Industrial Port enhancement, a $25-million financing to retail group City Mart and $40-million funding to Sembcorp and MMID Utilities Pte Ltd’s gas turbine project.