Thursday, August 17, 2017

Microfinance lender to expand on Maybank loan

Myanmar Finance International Limited (MFIL) – a microfinance joint venture between a London-listed investment firm and a Norwegian fund for developing countries – is planning to expand its operations after receiving a local currency loan from the Yangon branch of Maybank.

The lender will use the proceeds from the US$1 million equivalent loan to expand its business and loan portfolio, according to London-listed Myanmar Investments International Limited, which owns 37.5pc of MFIL.

The Norwegian Investment Fund for Developing Countries (Norfund) owns 25pc, while Myanmar Finance Company holds the other 37.5pc.

MFIL has grown its customer base from around 10,000 in September 2014, when Myanmar Investments International first invested, to over 38,000, according to the London-listed firm. The lender’s loan book has increased from K800 million to K6.5 billion over the period, it added.

Norfund took its stake in MFIL last year, and that $1.4 million equity investment took the lender's paid-up capital to around $5 million, Chung Chee Tham, an investment director at Myanmar Investments International, told The Myanmar Times. That has been drawn down, and so the lender followed its plan to raise debt in order to expand, he added.

The London-listed firm said the microfinance lender is considering launching new products, and plans to expand its branches from six to 10 in 2017. The Maybank loan is only the first in a series of debt financing initiatives that MFIL is planning in the coming years, it added.

This will be additional financing aimed at expanding the business further, rather than rolling over the new loan, Mr Tham said.

Myanmar’s microfinance sector received a boost recently from a loosening of regulatory restrictions. The shift includes allowing lenders to take deposits, and letting local and international microfinance institutions take loans in either dollars or kyat.

As MFIL is an international lender borrowing from an international bank, it could have signed the Maybank loan before the regulatory change, Mr Tham said. But the change in regulations does means MFIL can consider borrowing from local and international banks in the future, he added.

The microfinance sector has also seen acquisitions and new firms set up in the last few months. Thai-listed firm Group Lease bought a majority stake in BG Microfinance Myanmar in September and intends to invest almost US$7 million and increase the number of branches. Korean credit card firm Shinhan Card recently received a temporary one-year licence for microfinance operations.

But people in the microfinance industry say the demand for credit is easily large enough to accommodate more players and expanded operations

“At this point the market is definitely big enough,” Mr Tham said. “There’s definitely excess demand over what the market can supply.”

This article has been updated to clarify Norfund's stake in MFIL, which is $1.4 million, of MFIL's total capital of $5 million.