Asian companies eye MFI growth in Myanmar
Thai-listed firm Group Lease has bought a majority stake in BG Microfinance Myanmar, with plans to invest almost US$7 million into the business and ramp up the number of branches. Korean credit card firm Shinhan Card, meanwhile, is preparing to start its
Two firms have announced expansion plans for the microfinance sector, with a Thai firm buying a majority stake in BG Microfinance Myanmar, and a Korean firm preparing to start services.
GROUP Lease has bought almost 72 percent of BG Microfinance from Sri Lankan financial group Commercial Credit & Finance, which will hold the other 28pc.
The Sri Lankan group set up BG Microfinance in 2014 and received a permanent licence in 2015. The lender has 9800 customers and a portfolio of group loans – to groups of five individuals – amounting to around US$1.5 million, GL said.
But GL chair Mitsuji Konoshita said that Sri Lankan authority restrictions on capital outflows from that country had prevented BG Microfinance from increasing its portfolio, which Mr Mitsuji is expecting to reach $30 million to $40 million in the year following GL’s acquisition.
He expects monthly profits to increase dramatically from $20,000 a month to $200,000, which will be made possible through “effective high interest rates”, GL said.
GL will inject $6.8 million into BG Microfinance and increase the number of branches from four to 12, according to the firm’s announcement. The acquisition is pending a due diligence review of BG Microfinance, which Mr Mitsuji expects to be finished shortly.
Shinhan Finance Group is also preparing to pour investment into Myanmar’s financial industry, Wi Sung Ho, chair of sister firm Shinhan Card, told The Myanmar Times.
Shinhan Card is preparing to roll out microfinance services in September, and Shinhan Bank is preparing to open a branch in October after winning a licence earlier this year. The microfinance business will start in Hlaing Tharyar, Insein, Shwe Pyi Thar and Mingaladon townships in Yangon Region and two townships in Bago Region.
Shinhan Card managing director Kim Tae Jung said the areas were those in which the firm had permission to operate, but it is hoping to extend services to Nay Pyi Taw and Mandalay later on. The firm will lend up to K3 billion this year ($2.5 million), and more in coming years, he added.
Anyone in employment can apply for a one-year K300,000 loan with an annual interest rate of 30 percent, he said, adding that the firm will also issue group loans. Customers will be able to apply for loans directly at the company, which will be dispersed in cash. But Shinhan Card is planning to partner with local banks and offered a card-based system for receiving loans further down the road.
Myanmar’s regulator has issued Shinhan Card a one-year temporary licence for microfinance, and will decide whether to provide a permanent licence based on quarterly analysis of the Korean lender’s operations.
“We’ll decide on a permanent licence based on how the firm improves basic social conditions for people,” said U Wai Than, assistant director of the Financial Regulatory Department.
The department has granted licences to 166 organizations to provide microfinance service throughout Myanmar of which 78 are based in Yangon Region.
An attendant makes tea at a tea shop. Microfinance can help provide funding to entrepreneurs and small businesses.