Singaporian microfinance institution Hayman Capital plans to double the size of its Myanmar operation in 2017 in the wake of last year’s much welcomed regulatory changes to the government’s 2011 microfinance law.
In December last year Hayman Capital Co Ltd announced it had passed K4 billion in outstanding loans, growing 129% since April 2016, while this month the company announced it had achieved “breakeven” after 16 months of operation.
“2016 was a very important year, we really showed our performance which is what we declared we would do when we applied for a license with the FRD (Finance Regulation Department),” said Sultan Marenov, Managing Director and CEO of Hayman Capital.
Hayman Capital’s growth comes after the government last August relaxed microfinance regulations, giving both local and foreign MFI’s more flexibility in accessing loans, where they can operate and liquidity and solvency rates.
“It’s a good time to invest, particularly in the microfinance industry in Myanmar because the government has done many good things like open up the industry and lay down some good regulations, so they gave us the opportunity to grow,” Marenov told Myanmar Business Today.
Through its five branches, Hayman Capital serves 20,000 customers, a mixture of micro entrepreneurs and small farmers, in Yangon and Bago divisions but there are plans to apply for licenses to expand into Mandalay and Sagaing region this year.
“We plan on getting another 20,000 customers this year, then another 20,000 next year,” said Marenov.
But despite the ever increasing demand for finance services in Myanmar, liquidity issues in the MFI sector means lenders are having a tough time turning demand into dispersed loans. Marenov says that after the right investors have been found, there is a turn around of three to four months for every loan after whilst they await approval by the Central Bank.
“This is the big challenge for MFIs right now… Demand is high, people need money but we (MFI’s) have a lack of funds,
“In spite of these challenges, we have a realistic forecast to have a loan portfolio of K10 billion next year. But if the challenges we face in overseas loans are lifted, I’m optimistic we can grow by our company by 300% per year,” he said.
While last years reforms to the sector were welcomed by lenders, the sector remains highly regulated by the FRD, which comes under the Ministry of Finance. One of the major steps taken to open up the sector was relaxing rules to allow foreign MFIs to apply for loans from local banks, in Kyat, to negate the issue of borrowing from overseas with the volatile US dollar-Kyat exchange rate.
“We’re looking into this. This is a good opportunity for us and for banks, because we are predictable borrowers,”
But for foreign MFIs like Hayman Capital, a lack of collateral poses challenges in securing loans off of local banks, while the big foreign banks based in Myanmar are very regulated and tend to be risk averse, said Marenov.
Caps on voluntary deposits have also been lifted, which in theory should be a boon for hopeful deposit taking MFIs like Hayman Capital, who attract term savings from customers as part of a fund base for their operations.
But strict regulations were also introduced which limit deposit taking institutions to those MFIs who have been operating for three years and post profits in two consecutive years.
“We already have almost two years experience and we look forward to achieving consecutive profits in the next two years, so we’re confident we’ll meet the requirements. But we would like a timeframe from the regulators so we know when we’ll be able to start taking deposits,” said Marenov.
Source: Myanmar Business Today
