Proximity Finance Bolsters Rural Financing with 5 Billion MMK Loan from Yoma Bank
An estimated 12,800 farming families from rural areas in Myanmar will get access to a low-interest loan for their livelihood development
Jul 22, 2019
Yangon, Myanmar – July 22, 2019 – Proximity Finance has signed a 5 billion MMK back-to-back funding agreement with Yoma Bank to support expanded micro lending to Myanmar’s smallholder farmers. Yoma Bank’s financing will go towards low-interest loans for an estimated 12,800 farming families. Proximity Finance is one of the largest MFIs in Myanmar with over 100,000 end customers and a portfolio of over $20 million.
Yoma Bank is one of Myanmar’s largest banks with over 3,000 staff and 80 branches nationwide. Yoma Bank first introduced the back-to-back structure in a loan to Proximity Finance in mid-2017 and has since become a market leader in providing credit in local currency to local microfinance institutions. “Yoma Bank is delighted to backstop Proximity Finance with balance sheet funding that will support rural financing in Myanmar. This funding highlights our commitment to financial inclusion, and we are pleased it will be put to good use to improve the livelihoods of the rural community." said Mr. Hal Bosher, (CEO of Yoma Bank).
Investing in emerging markets like Myanmar can be expensive. A microfinance institution that borrows hard currency and lends to its customers in local currency undertakes expensive hedging practices to protect its earnings from the risk of volatility in exchange rate movements. This back-to-back funding agreement is semi-collateralized with USD provided by non-profit social impact investor MCE Social Capital, with a three years’ tenor. The hard currency acts as Proximity’s hedge against exchange rate fluctuations on the back of which Yoma Bank lends to them locally in Myanmar Kyat, thus streamlining compliance with local financial regulations and significantly reducing the necessary disbursement time to finance their customers.
“This back-to-back structure of funding allows more investment into Myanmar in hard currency while allowing MFIs to repay in local currency. This deal with Yoma Bank should continue to be an example for other local banks to offer MMK funding to MFIs” – Hedvig Sundberg (CEO of Proximity Finance).