NongHyup Finance Myanmar considers capital increase for expansion

This is the third of a series highlighting Korean banks’ operations in Southeast Asian countries.

NongHyup Finance Myanmar is considering raising capital to finance its expansion in the region, said Kim Jong-hee, managing director of the bank.

Also, it will invest in equities of banks in Myanmar for strategic partnerships when opportunities arise as the country moves to deregulate laws on foreign bank services in the future.

This is in line with its plan to increase the number of its branches to seven by the end of this year, from three in the first half of the year, he added.

Launched with $3 million in capital in Yangon last January, NongHyup Finance Myanmar marks Seoul-based NongHyup Financial Group’s first overseas bank unit.

It mainly provides microcredit and savings accounts to locals working in the agriculture sector.

“In 2018, we are looking to have 12 branches. Given the expected loan growth, we are planning for a capital increase,” the NongHyup Finance Myanmar chief told The Korea Times via an email.

“Our ambition is to have assets of $10 million in three years in Myanmar, and develop NongHyup’s first successful overseas business model.”

He noted that it has been providing microcredit of less than 1 million Burmese kyat on average per person in Myanmar.

As Myanmar has restrictions on foreign financial operations given that its financial sector is still underdeveloped, NongHyup will not be able to seek local targets for mergers and acquisitions in the short term.

Its capital market is small and nascent since the Yangon Stock Exchange opened last year.

However, as the economy develops, it is moving toward easing some rules on foreign direct investment. The country has been growing over 7 percent on average per year since 2013.

“In the mid to long term, we will consider equity investments in local banks whose financial operations are closely aligned with NongHyup’s amid deregulations,” Kim said. “We will also not rule out the possibility of further diversifying our services.”

One of the services it would like to offer in the future is mobile banking.

He said that Myanmar is rapidly becoming a tech-savvy country with more than 70 percent of its population using smartphones.

“We will have to review the feasibility of the digital business with our parent company as our branches and customers increase here,” Kim said.

NongHyup Financial Group Chairman Kim Yong-hwan decided to establish a microfinance unit in Myanmar after visiting and meeting former Myanmar President Thein Sein in 2015.

This was part of the group’s long-term vision to become a global agricultural bank by sharing its know-how in financing and development with developing and underdeveloped economies.

NongHyup seeks to help develop and improve Myanmar’s production, distribution, sales and storage systems of agricultural goods, with the Korea International Cooperation Agency (KOICA) and Korea Rural Community Corp. (KRC).

“NongHyup specializes in this area,” he said.

“As we work to offer our specialization, and KOICA and KRC help transfer agriculture technology to Myanmar, we will be able to share this model with other developing countries nearby, including Vietnam and India.”

Source : The Korea Times