LB Finance PLC’s overseas foray has been on a quest to secure a license to extend its operations in Myanmar. After decades of military rule, Myanmar has finally opened up and LB Finance been successful in obtaining a permit of operating a microfinance business in the central region of Myanmar. The non-bank lender with an asset base of Rs.109 billion was granted a license to operate the microfinance business in the Bago Region of the Republic of the Union of Myanmar. The region is administrative southern central part of Myanmar and has a population of 5 million. Bago is an agricultural region that cultivates rice as the primary crop which depends on the trade of timber as the primary economic activity.
LB Finance has established a 99 percent owned subsidiary, LB Microfinance Myanmar Company Limited. The company is set to become operational from 31st March 2018. Lanka Orix Leasing Company PLC was the first non-bank lender to establish microfinance operation in Myanmar in 2013. Sampath Bank PLC and Commercial Bank of Ceylon PLC set up representative offices in 2015 at Yangon which is the largest city and the former capital of Myanmar. Other Sri-Lankan banks have also established non- finance institutions in the region and the search for growth opportunities in the market has now reached saturation.
Michael and Susan Dell Foundation and Lok Capital are some of the marquee investors in the Indian Microfinance companies. Microfinance Institutions are facing challenges following the involvement from finance banks and private sector banks decision to focus and micro-lending forcing the investors to shift their priorities. Michael and Susan Dell have significantly supported the Indian Microfinance Institutions inclusive of Janalakshmi and Sonata Finance. The company which was established I 1999 is seeking to make a complete exit by 2019.
According to Geeta Goel, vice president for mission investing, Michael & Susan Dell Foundation, the company has decided to exit the Microfinance companies as they make a priority to make investments in education, sector and jobs creation as they pursue the creating of a livelihood. Since the 90s, the microfinance Institutions from India have delivered financial services at the doorsteps of their clients and economically disadvantaged women in the country. The move by the investors to withdraw is a process to offload their investments in the microfinance sector which they have incubated for a long time and are now paving the way for new investors.
Lok Capital has entirely withdrawn from their investments in pure microfinance institutions though they have maintained their investments in small finance banks. MFIs assured that interests from investors remain intact as small finance banks hold a significant microfinance portfolio.
Romesh Sobti, MD & CEO of IndusInd Bank has expressed great faith in the microfinance business in India. He expressed his optimism after the private sector bank confidentiality, exclusivity, and standstill’ agreement with Bharat Financial Inclusion. The deal which was signed last month put up due diligence and discussions that evaluated a potential strategic combination between the two financial organizations. According to Sobti, in post demonetization India, the microfinance industry is restoring its normal disbursement levels. It has embraced different changes and adopted a new mechanism to get over the impact of the demonetization period. The improvements were much more than the expected.
Towards the end of September 2017, microfinance accounted for 2.18 percent of the overall loan book which is expected to rise to about 5 percent by 2020. Sections of the weak in the society are granted loans through the ‘business correspondent model that comprise of microfinance institutions that are spread geographically across the country. Small micro-enterprise inclusive of trading, snack stores, bicycle repair shops have been empowered through the loans.
A dedicated inclusive banking group by IndusInd Bank partners with suitable intermediaries or financial institutions in a collaborative approach. The mechanism allows the Bank to provide financial services efficiently to their clients and ensure positive development in the financial sector.
The Agricultural sector is an essential aspect of a nation. Many financial institutions have taken the responsibility of providing the farmers in their country with commercial service to enable the growth of different crops for consumption of the people in the nation. Similarly, The Azerbaijan Micro-finance Association (AMFA) has disbursed loans worth 20 billion manats ($11.84 billion to around five million people. The loans were provided to clients from rural locations to aid in the development of agriculture. AMFA Executive Director Zhalya Hajiyeva addressed the future of Micro-finance in Azerbaijan while considering the difficulties and opportunities. She said that massive amounts of unreturned loans are contributed by the devaluation of the national currency.
Zhalya emphasized the importance of creating the Credit Guarantee Fund to assist entrepreneurs to access financial services and also a solution to the increased competition in the finical sector. Establishing a Credit guarantee will also enable entrepreneurs’ access manat loans from authorized banks. Vusal Gasimli, Executive director of the country’s Center for Analysis of Economic Reforms and Communication, urged microfinance organizations to incorporate new and innovative financial technologies in their operations.
Suleyman Kalyashev, who chairs the Association of Microfinance of Azerbaijan also urged the microfinance organizations to expand their yield f manta loans. The institutions remain committed towards the provision of financial services to the people to stimulate production and the distribution of goods and services.
Microfinance institutions have significantly empowered women from the knowledge that they are among the marginalized groups in the society. There have been numerous opportunities for growth among the women particularly the opportunities to run their businesses and improve the lives of the people in the community they dwell. The Cameroon Women Business Leaders Association (CWBLA) signed a partnership in agreement to partner with Nofia which is a microfinance institution. The association between the two organizations is directed towards the benefit of the women in the group. They will receive better financial services inclusive of easier access to loans for their commercial projects.
CWBLA March 10th 2017 in Douala Cameroon with the founding president, Mary Concilia Anchang of The African Chamber of Trade and Commerce. The reason behind the formation of this association was to find and generate solutions to the challenges facing businesswomen. Its mission was to promote the activities of these women venturing in business to make them heard and visible. A conducted study established that accessing funds is challenging to the development of SMEs. The study further revealed that when the women lead the SMEs, challenges to overcome are more. Nofia is now the financial partner of the Cameroon Women Business Leaders Association and continued to offer them quality financial services.
In the past years, the microfinance sector in Zimbabwe faced numerous challenges including usurious interest rates that dragged down its operations. Assets belonging to the borrowers were also repossessed before the formal regulation of Reserve Bank of Zimbabwe (RBZ). After several adjustments in the sector, the industry is currently gaining back the confidence of the public and advancing into Zimbabwe`s financial inclusion strategy. Reports are indicating a rise in the number of the microfinance institutions in the country as well as more and new savings account leading to more borrowing from the microfinance institutions. The savings account grew from 522 in June 2016 to 1993 by March 2017. 251,553 clients were active in these establishments by June last year compared to the current 322,728 active customers that indicate a 28 percent growth. The improved operations have enabled the growth of assets.
The achievements were not without several reforms from the reserve bank to promote a vibrant microfinance sector. The improvements and the initiatives were geared towards improving the credibility of the microfinance sector after its initial collapse. Additional a $ 10 million microfinance revolving facility is set to be constructed to strengthen the microfinance institutions in Zimbabwe to offer finance solutions to low-income and marginalized groups. The institutions are required to charge their clients an interest rate not exceeding 2 % per month for the sector to maintain positive growth.
The dominant Reserve Bank of India (RBI) concluded a financial decision that gave the Microfinance Institutions (MFIs) the authority to act as business correspondents for banks. The decision has so far been a success from the guarantee of a steady flow of funds to the unbanked sectors although several micro lenders face the challenge of raising enough capital. Data from Bharat Microfinance Report of 2017 indicated a 27 per cent growth in business correspondents in the last fiscal year. Similarly, the off-balance sheet portfolio for MFIs increased from 13 per cent to 20 per cent in the preceding fiscal year. In January 2006, the RBI granted permission to MFIs, NGOs and other civil society organizations to function as banking intermediaries in the provision of financial and banking services. Loans delivered by MFIs as partners of the bank are not included in the balance sheet thus contributes to the growth of their businesses devoid of additional capital.
Manoj Nambiar, MD at Arohan Financial Service expressed significant optimism of the approach that functioned to optimize capital and worked best for small micro finance institutions that could not raise money easily. He described such partnerships as value creators. Microfinance institutions can now develop a customer base and through bank loans and earn an extra fee for their services.