Foreign firm signs on for microfinance

The subsidiary Myanmar Investments International Ltd has signed an agreement with a local company to create a microfinance company in Myanmar.

Claiming the newly formed Myanmar Finance International could be the first foreign microfinance joint venture in the country, the partners have agreed to contribute US$4.8 million in capital, it said in a press release.

Myanmar Investments will contribute $2.75 million and own 55 percent of the new firm, while Myanmar Finance Company (MFC) – the local partner, which currently provides loans to small-scale business operators in Yangon and Bago regions – will own the rest.

Myanmar Investments International listed on the London Stock Exchange’s AIM submarket in June 2013.

U Aung Htun, managing director of Myanmar Investments, said in the press release that there are lots of regional microfinance success stories.

“A well-run microfinance business in a well-regulated environment represents a socially responsible investment as well as an attractive commercial opportunity as has been demonstrated elsewhere in Southeast Asia,” he said.

U Htet Nyi, founder and managing director of local partners MFC, said the new joint venture will enable the firm to offer more loans more quickly, adding to its estimated 10,000 clients.

The joint venture is conditional on the new firm, Myanmar Finance International, receiving its own microfinance licence, which is expected to be issued by the Myanmar Microfinance Supervisory Enterprise, an arm of the Ministry of Finance, the press release said.

Myanmar has prioritised developing microfinance as a way to promote poverty alleviation and development. In 2011, a microfinance law was released, and authorities have been working on follow-up rules and regulations governing the industry.

More than 200 organisations have so far received microfinance licences, though the new firm will be one of the biggest, it claimed.

Myanmar also currently maintains a cap on loan size of K500,000 (US$514) and a cap on interest rates of 2.5 percent a month for MFIs.

Independent economist U Hla Maung said that the 2.5pc interest rate microfinance institutions are allowed to provide is well below rates as high as 10pc that local moneylenders often charge farmers, but is still about twice what banks are allowed to charge


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