The Overseas Private Investment Corporation (OPIC), the U.S. Government’s development finance institution, has committed $8 million to Proximity Finance to support expanded micro lending to rural borrowers, primarily smallholder farmers, in Myanmar.
OPIC Chief of Staff Eric Jones and Proximity Designs CEO Jim Taylor, and Proximity Finance Head of Finance Sein Nwe Oo signed the commitment. The Skoll Foundation, a long-term supporter of Proximity Finance, has committed an additional $2 million of subordinated debt as part of the co-financing package, according to a press release from the US Embassy on 3 April.
In Myanmar, agriculture employs 60% of the labor force and contributes roughly 30% of total GDP, but limited access to credit in rural communities continues to restrict the sector’s growth.
Without formal financial services, borrowers in these regions are often forced to accept high interest rates from informal lenders, or pawn their land and other assets for capital.
Proximity Finance, which designs its loans to meet the particular needs of smallholder farmers, is the microfinance arm of Proximity Designs, a social enterprise dedicated to serving Myanmar’s rural families. Through its rural branch network and specialized loan products that are disbursed and repaid in line with the planting and harvest seasons, Proximity currently serves the financing needs of over 100,000 households, a number that is expected to double over the next five years, a period that will see them disburse nearly 1,000,000 loans. OPIC’s financing is expected to support an additional 100,000 microloans throughout the life of the investment.
OPIC’s partnership with Skoll Foundation is an example of a blended finance transaction, an innovative funding structure where different types of capital work together to achieve economic and social impact. One of the first arrangements of its kind in Myanmar, the structure has helped secure Proximity’s biggest single investment to date, over three times the previous largest sum invested. OPIC’s commitment also advances its 2X Women’s Initiative to support projects that benefit women, who represent over half of the company’s customers.
“The U.S. government is committed to supporting private sector-led growth in Myanmar to maintain a free and open Asia Pacific,” confirmed U.S. Ambassador Scot Marciel. “For almost 50 years, OPIC has supported investors in emerging markets like Myanmar. OPIC’s model of working with and bolstering the private sector stands in contrast to state-led directives in the region that are all too common.”
“Although financial inclusion in emerging markets has come a long way in recent years, rural populations across the world continue to be underserved by formal financial services in large part due to their unique needs,” said Acting OPIC President and CEO David Bohigian. “By expanding their access to affordable credit, OPIC’s partnership with Proximity will equip smallholder farmers to improve their yields, expand their enterprises, and help their communities thrive.”
“In the next five years, Proximity Finance will disperse nearly a million loans to entrepreneurial farmers who are currently underserved by the formal credit sector” said Proximity Finance CEO, Hedvig Sundberg. “This commitment from OPIC and the Skoll Foundation is an important step in enabling us to reach this goal, and is an example of the kind of innovative, blended investment I think we’re going to see a lot more of in the field of impact investing in the future.”
