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    What's next for rural credit?

    Maria Fulwiler, Proximity's economic analyst, introduces Proximity's newest financial service...

    Proximity Designs has been offering informal credit in the Delta region, as part of Cyclone Nargis relief, since the beginning of 2010. With new regulations in place however, we now have the opportunity to formalize and expand our credit services. So, in 2012, Proximity Designs launched a new venture – Proximity Finance, a unit of the organization solely dedicated to providing farmers with desperately needed credit that is tailored to their unique needs. Unlike traditional microfinance, which is best suited to urban areas where borrowers are more likely to have a regular stream of income and expenses, Proximity Finance designs products that are adapted to the major cash flow fluctuations of crop farmers in Myanmar. For a farmer, cash needs depend on the season – a huge cash outlay is required to plant and fertilize, and income is only expected once the harvest is complete. This unique cycle makes the traditional microfinance process of bi-weekly interest payments highly untenable for the typical farmer. To accommodate this, Proximity Finance has designed the “Crop Loan,” a loan of either 120,000 Kyats or 200,000 Kyats that is distributed at the start of planting season and collected along with a balloon interest payment only after the harvest is complete.

    On January 23rd, 2013 Proximity Finance distributed its first crop loan to an eager farmer in the Pyapon Township of the Ayeyarwady division. By February 1st, 4,885 farmers had received loans of either 120,000 or 200,000 Kyats. By the end of 2013, we plan to have distributed almost 28,000 loans to 18,000 unique customers in the Delta, Yangon, Nay Pyi Taw and Mandalay areas.  This is a very exciting time for us at Proximity Finance; not only are we expanding our loan book by more than 100% in one year, but we are introducing new products, new policies, new practices and reaching into areas that we have never before serviced with loans. By 2015, we hope to have reached more than 35,000 unique customers across the country and to have increased the average value of our loans by more than 150%. And that’s only the start of it. With a credit drought plaguing the Myanmar farmers who make up 80% of the total population and receive a paltry 0.4% of the credit, the demand for crop loans is seemingly infinite. 

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