Myanmar remains the poorest country in South-East Asia, with an average income of US$3.5 per day and 26% of the population living under the poverty line. More than half of the 52 million inhabitants work in the agriculture sector, and agriculture provides some form of livelihood to over 70% of the population. Myanmar ranks 145 out of 188 countries on the UN Human Development Index.
In terms of financial inclusion, less than 30% of the population has access to formal financial services, which means there is a large untapped market for microfinance. The enabling environment is improving: the Microfinance Law issued in 2011 paved the way, the policy support for financial inclusion is strong, the regulator’s capability is steadily improving, and the effort is supported by many international donors and investors. Within this context, Proximity Finance plays a key role in the financial inclusion of rural populations, as it focuses primarily on providing loans for agricultural purposes. As a business unit of Proximity Designs, it is the only fully integrated player for agricultural microfinance in Myanmar, serving smallholder farmers not only with access to finance but also access to technology and knowledge.
Proximity Finance currently operates 14 branches in three different areas of Myanmar. Seven are located in the Delta region, where the organization started lending operations back in 2009. Five are located in the “Dry Zone,” south of the city of Mandalay. And two branches were opened more recently in the Uplands. All branches are located in small rural towns and serve more than 1,100 community villages. In 2017, Proximity Finance plans to open two new branches in the northern part of the Dry Zone, but growth will be driven primarily by deeper market penetration to increase the reach of existing branches, as well as a slight increase in loan sizes to better serve the financial needs of existing clients.
Proximity Finance provides four types of loan products, all in MMK and with declining interest rates: the Crop Loan, Livestock Loan, Migration Loan, and Enterprise Loan. The organization follows a collective group responsibility methodology, forming Small Lending Groups (SLG) of four to eight borrowers who co-guarantee each other’s loans. Five to seven SLGs in one village make the overall Village Lending Group (VLG), consisting of up to 35 borrowers. For villages with more than 35 borrowers, there is more than one VLG. The Committee of the VLG consists of the leaders of each SLG, and this Committee is the main interface between Proximity staff and borrowers.
Proximity Finance applies a “human-centered design thinking” approach to the development of its products. This approach involves extensive field research, including questionnaires and in-depth interviews, which are conducted before new products are introduced. The terms of each product are designed to cater to the specific needs of individual farmers, depending on the crop (e.g.: rice vs. cassava), the livestock (e.g.: duck vs. goat), the season (e.g.: summer paddy vs. monsoon paddy), and the region (e.g.: Delta Region vs. Dry Zone). As a result, loan structures match as much as possible the cash flows of the farmers.
Daw Lei Lei (pictured above) is a duck farmer and mother of two in the village of Hmawbi, in the Delta Region of Myanmar. Accessing quality feed for her ducks is crucial to the success of her business and her wellbeing, since egg production can vary greatly depending on the food that her ducks eat. She needs the food the most in July, which is also the leanest month for thousands of duck farmers in Myanmar’s Delta Region; because rice farming is in full force this month, duck farmers have to limit the movement of their flocks, meaning production can drop to as little as one or two eggs a day for every ten ducks. In partnership with Kiva, Proximity Finance has supported over 2,200 duck farmers in Myanmar with micro-loans that are specifically designed to help duck farmers purchase quality feed during this period. Daw Lei Lei is one of the first Proximity customers to benefit from this unique loan program. With a $200 micro-loan, she was able to purchase more ducks and quality feed, which helped to stabilize her income. With the increased profits from her duck farming business, Daw Lei Lei’s husband purchased a boat to start his own transportation business, which in turn yields enough profit to cover their two children’s school fees.
In September 2017, MCE Social Capital disbursed $1,500,000 to Proximity Finance. The organization currently reaches more than 60,000 clients, 100% in rural areas and with an equal split between men and women. As Myanmar’s only major microfinance player dedicated to agriculture, Proximity Finance is essential to the advancement of financial inclusion in Myanmar and shares MCE’s strong commitment to social impact and sustainable rural development.
Below: Fabrizio Cometto, MCE Portfolio Manager, with several clients of Proximity Finance.