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    Entries in microfinance (2)

    Thursday
    Jul312014

    Credit, Technology, and the Rural Myanmar Dream

    "There's no denying that access to credit can improve people's lives, and yet too much credit, or the wrong kind of credit, can put families in an unending cycle of debt." Renowned designer Jan Chipchase spoke these words Tuesday night during a presentation at Yangon gallery, TS1, where Proximity Designs, Studio D, and Visa unveiled the results of an 8-week project to design a culturally specific loan for rural Myanmar households. 

    We knew going into the project that the challenge we’d chosen was rich in complexity. Indeed, developing mechanisms to help families break from the burden of debt cycles is by no means straightforward.

    We started off by spending two months conducting over 200 interviews to gain an understanding of financial conditions in rural Myanmar, which has experienced five decades of near complete isolation and exclusion from formal banking services. We learned that a range of inventive, informal systems fill this void. Some, such as monastery lending groups, are convenient, culturally relevant, and help unite communities, but too often informal loans charge interests upwards of 10% a month. In the agriculture based rural economy, families often need money outside of harvest time, and the only way they can get it is by agreeing to these harsh interest rates (for the full report, download "Afford Two, Eat One").

    Proximity Designs, Studio D, and Visa presented the rural loan Proximity will begin testing early 2015

    This past Tuesday, more than 100 people packed into TS1 to engage in a conversation about rural finance in Myanmar. Jan Chipchase from Studio D and Su Mon from Proximity walked guests through our process and end product: a prototype loan that supports families where one or more members travel seasonally in search of work, because there are no jobs available locally in the villages. Helping alleviate rural debt by offering people a loan isn’t the most intuitive solution, but in contrast to high-interest informal loans, Proximity will offer affordable credit. The loan will also alleviate the stress on both the family members who stay behind and await remittances, and on the family members who must cover travel costs and living expenses while they search for work.

    The space was opened for a conversation with fellow social enterprises, financial organizations, and the broader community on the feasibility of mobile money in Myanmar, how to build trust with rural customers, along with the potential for technology to bridge the infrastructural setbacks that rural households face. It was the kind of evening that sparks innovative ideas and that inspires us to continue thinking of new ways to financially empower our rural customers. 

    If you attended the event, here is a condensed version of Tuesday night's slides.

     

    Friday
    Feb082013

    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.