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Investing in the final frontier

A new dawn for microfinance in Myanmar

A new dawn for microfinance in Myanmar

Having been closed off for 40 years, Myanmar has undergone recent reform. It is once again experiencing economic growth and is being touted as the ‘final frontier’ by The Economist. The country is slowly opening up to the outside world, which makes it an attractive investment opportunity for foreign investors, both financially and socially.

The unmet demand

Myanmar is a large, South-East Asian country with over 51 million inhabitants, high levels of poverty (26% below national poverty line), a huge unmet demand, and a relatively favourable and improving political and economic outlook (“the country could quadruple its economy by 2030,” McKinsey Report, 2013). However, despite the economic growth, Myanmar is still one of the poorest countries in Asia and only 10 to 20% of its people have access to formal financial services. A largely undeveloped microfinance sector has exacerbated the situation; however, Dawn Microfinance is one of the few microfinance institutions (MFIs) active in Myanmar.

“Financial inclusion can play a major role in the upcoming decade to further develop Myanmar’s economy at a grassroots level.”

Karel Nierop, Senior Investment Officer, Triodos Investment Management

Within the relatively small microfinance sector, Dawn has built trust with the local government and communities over the past 14 years. Save the Children, a global NGO, founded Dawn and successfully grew the MFI to the fourth largest in the country. They recently announced the decision to divest its microfinance activities and focus more on its core programmes, leaving the opportunity for new investors.

Growing the microfinance sector

Dawn Microfinance Myanmar entrepreneurTo catalyse the microfinance sector in Myanmar using sustainable principles, Triodos Investment Management, FMO, and American impact investor Accion have joined together to further develop Dawn Microfinance into a leading, for-profit MFI. The three co-investors own 100% of Dawn Microfinance. Three funds managed by Triodos Investment Management (Triodos Fair Share Fund, Triodos Sustainable Finance Foundation, and Triodos Microfinance Fund) jointly hold a 30% equity stake.

Karel Nierop, Senior Investment Officer at Triodos Investment Management supported the equity investment decision and subsequent process:  “Myanmar has been closed off to the outside world for so long. With the recent and gradual opening of the country, it offers a challenging but also promising market with huge unmet demand, in which financial inclusion can play a major role in the upcoming decade to further develop the economy at a grassroots level.”

“We aim to further strengthen and grow Dawn into a leading sustainable MFI in the country.”

Karel Nierop, Senior Investment Officer, Triodos Investment Management

Dawn is actively growing its footprint and currently operates 12 branches, employing 95 people, and serving 22,000 clients. Triodos Investment Management, FMO, and Accion will lead Dawn in the transformation process from an NGO to a for-profit MFI. Although Dawn currently only provides group loans and has a small loan portfolio of USD 2.5 million, the long-term intention is to become a larger financial services provider to low income households, offering a wider range of products in addition to group loans, such as individual loans, SME loans and savings.

“The investment in Dawn allows us to gain a substantial stake in one of the few existing and successful MFIs in Myanmar with likeminded strategic investors FMO and Accion. We aim to further strengthen and grow Dawn into a leading sustainable MFI in the country, enforcing its information systems, product diversification and management capacity,” says Nierop.

Going forward, the key focus will be to expand the product portfolio and prioritise client education and protection. A senior representative of Triodos will be present on the board of directors.

words: Lauren Maxwell, Triodos Investment Management
photography: Karel Nierop, Triodos Investment Management

Find out more about Triodos Bank’s work in microfinance.

 

Triodos Investment Managment
Investing in microfinance

Triodos Bank has been one of the leading investors in the microfinance sector since making its first investments in the industry in 1994. We recognised that sustainable development, and addressing inequality, exclusion and poverty issues in particular, was a global issue and have been applying our expertise in the inclusive finance sector to address these international challenges ever since. As an investor we can influence the direction the inclusive finance industry takes. We share this responsibility with everyone involved in the value chain – investors, microfinance institutions, banks and other stakeholders – to understand, acknowledge and act in the interests of clients; clients, who are typically living on low-incomes and constrained by limited financial knowledge, power and influence. Focusing on the interests of these individuals and their families is the only way to achieve long term sustainable financial results. In 2014, Triodos Investment Management’s microfinance funds provided finance to 102 microfinance institutions in 44 countries, serving approximately 8.4 million savers, and 11 million borrowing clients.

 

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