Sherpa Hossainy's Blog

IFC estimates Myanmar’s microcredit demand at $1b

Posted in Banking, Finance, Microfinance, Myanmar, Yangon by Sherpa Hossainy on July 9, 2013

Published in Myanmar Business Today (Vol 1, Issue 4) on February 14, 2013

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Demand for microfinance in Myanmar exceeds supply four times as the country’s economy expands following decades of isolation, highlighting the need to build up sustainable microfinance institutions, a study finds.

The study estimates that the total of outstanding loans in Myanmar currently stands at around $283 million whereas demand for microcredit is estimated at $1 billion.

The report, entitled “Microfinance in Myanmar – Sector Assessment,” released on January 29 by IFC, a member of the World Bank Group, and CGAP, a policy and research, said the demand is particularly high among farmers in Myanmar’s rural areas where more than two-thirds of the population lives.

“Myanmar’s microfinance law of November 2011 allowed the development of a nascent microfinance industry. Now there is an opportunity to support existing institutions and bring in new organisations to build a commercially sustainable microfinance network that improves access to finance for small and medium entrepreneurs and rural clients,” said Paul Luchtenburg, IFC’s Microfinance Program Manager in East Asia Pacific and one of the report’s co-authors.

The joint IFC/CGAP report is the first comprehensive publicly available assessment of the microfinance landscape in Myanmar since the enactment of country’s microfinance law in late 2011.

It highlights that the financial sector is underdeveloped compared to the rest of the East Asia Pacific region. Myanmar is one of the poorest countries in the region and increased access to financial services would greatly benefit its population and help the nascent small and medium enterprises, which form the backbone of Myanmar’s economy, grow and create jobs.

The report finds that Myanmar’s banking sector so far has found it commercially challenging to extend financial access to the poor. As a result, fewer than 20 people out of 100 have access to formal financial services, with most people relying on family savings or costly alternatives such as informal money lenders. At the same time, the market among Myanmar’s total population of around 60 million is large enough to attract domestic and international banks that could significantly improve outreach and contribute to innovation in the sector.

“With Myanmar’s breathtaking speed of change, government authorities and regulators are faced with the challenge of quickly bringing policies and regulations in line with the growing economic activity in the country,” said Eric Duflos, CGAP’s Regional Representative for East Asia Pacific and one of the report’s co-authors.

“The current microfinance law clearly signals government commitment to financial inclusion. We recommend that Myanmar’s financial regulators and supervisors adopt international good practices for microfinance as quickly as possible.”

The IFC last month announced that it had ventured into the microfinance sector by lending $2 million to Cambodia-based Acleda Bank for its microfinance project in Myanmar.

Pact Myanmar eyes $100m loan portfolio by 2016

Posted in Business, Microfinance, Myanmar, Yangon by Sherpa Hossainy on July 9, 2013

Published in Myanmar Business Today (Vol 1, Issue 7) on March 7, 2013

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Pact Myanmar, the largest microfinance service provider in the country, plans to expand its outreach in Myanmar by growing its portfolio and spreading into new townships, Pact Global Microfinance Fund (PGMF) Chief Operating Officer Fahmid Bhuiya said.

During the last two months, the Washignton-based microcredit lender expanded its operation in the Delta and Yangon region, opening six new branches in Kwan Chan Kone, Kaw Hmu and Twante township in Yangon and Pathein, Myaung Mya and Kan Gyi Daung township in the Delta region.

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A woman receives microfinance loan at a newly opened branch of PGMF in Kaw Hmu Township, the constituency of Daw Aung San Suu Kyi, in Yangon, Myanmar. Fahmid Bhuiya/PGMF

“The government has prioritised microfinance as a key part of its poverty alleviation programme and rural development. Pact is implementing about 80 percent of the country’s microfinance programme and we want to use our expertise and experience of implementing microfinance programme in Myanmar by expanding to new townships and new geographic locations,” Fahmid told Myanmar Business Today.

“Currently, we manage almost $70-million loan portfolio from donors like UNDP. As part of our expansion plan we are aiming to add another $25-30 million in the next three years, and reach a $100-million loan portfolio by 2016,” he explained.

Pact currently serves approximately 500,000 households, reaching 2.5 million beneficiaries in Yangon, Ayeyarwady, Magway, Sagaing, Madalay and Shan regions. Pact was allowed to expand its service into 26 new townships, besides its previous 25, under its microfinance licence, following the enactment of the microfinance law in 2011.

PGMF wants to expand to eight more townships in the next two months – Nat Mauk, Pwint Phyu, Yae Sagyo and Myaing in Magway region, and De Daye, In Gapu, Kyait Latt and La Myanthnar in the Delta region.

The new branches will have a total outreach of about 50,000 households, serving half a million beneficiaries, the lender said.

“All the regional governments in Yangon and Delta are giving us their full and welcoming support for expansion. We are gradually raising funds for loan capitals to expand to new areas, while currently we are supported by UKAID, USAID and LIFT,” the PGMF chief operating officer said.

“We are eyeing to serve 10 percent of the demand in three years. For only one NGO that is huge,” Fahmid said. A study of International Finance Corporation (IFC), a member of the World Bank Group, in January estimated Myanmar’s microfinance demand at $1billion.

“The government, donors and sponsors should promote more microfinance institutions like Pact to meet the demand. Some international NGOs have already expressed their interest and processing entry requirements,” he added.

“We don’t want to be selfish. We want to be open and we want more actors to come to the country so that clients can get more services.”

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