PROJECT APPROVAL DISCLOSURE
AgriFI received approval for a USD 3m loan to a rural microfinance institution in Myanmar: Maha Agriculture Public Co. Ltd
– Country: Myanmar
– Region: Asia
– Sector: Microfinance (28 crops covered)
– Total AgriFI Financing: USD 3m in local currency (MMK)
– Environmental and Social Category: C
Project overview
Maha Agriculture Public Co. Ltd was created in 2013 as a subsidiary of Myanma Awba Group, one of the largest agricultural input distributors in the country, currently serving approximately 3.5 million farming families. Farmers in Myanmar are a community which has been underserved by formal financial institutions. With 70% of the country’s labour force in the agriculture industry, it is essential for these farmer communities to have access to credible financial service providers (FSPs). The current lack of access to formal financing drives them to borrow from informal moneylenders with high-interest rates, significantly reducing profits they make from their harvests. Therefore, Maha Agriculture Public Co. Ltd was created as a microfinance institution with a visionary goal to become the leading rural micro-finance institution (MFI) in Myanmar, leveraging Awba Group strong expertise of Myanmar agriculture sector. AgriFI aims to support the company’s strong growth plan and increase its current loan portfolio building on their >33 000 active borrowers representing a Gross Loan Portfolio of >24 Bn MMK (~ USD 16m ).
Funding objective and impact
AgriFI USD 3m investment over 3 years would grow Maha portfolio and roughly enable to finance 2 harvests per year for ~5,500 rural farmers, (i.e. ~11,000 microloans per year, >30,000 loans over 3 years), enabling them to invest in higher quality input in order to improve agricultural yield (~1 ton per acre additional yield on average), therefore obtaining higher income (USD~2,000 additional revenue per year on average), consequently increase consumption expenditures and improve overall quality of life.
Why AgriFI wants to fund this project
The project is in line with AgriFI investment strategy and its additionality vision as described below:
– Strong impact on smallholders: 100% rural portfolio, with >90% of loans issued towards agri smallholders (among which ~50% own less than 2 Hectares, 90% less than 4 Hectares);
– Early stage: young MFI with strong growth ahead;
– Local currency risk: loan in local currency at the client convenience due to constraining regulations;
– Catalysing additional private investments: enabling Maha Agriculture Public Co. Ltd to secure its funding on time to reach its growth objectives, and willing to collaborate with additional investors and DFIs interested in the opportunity.
Environmental and social rationale:
The transaction is rated category C.
The overall portfolio risk exposure is limited, specific and easily addressed through mitigation measures developed by the institution.
Maha Agriculture Public Co. Ltd is working towards compliance and certification on client protection principles (as per Smart Campaign framework) as well as integration of tools for E&S awareness, monitoring and reporting.
IFC Performance Standards 1 to 3 can potentially be triggered across the existing exposure and diversification of the invested portfolio.