The Power of Small Business Loans
Supporting rural micro-entrepreneurs in Pyapon, Myanmar
Micro, Small, and Medium-Sized Enterprises (MSMEs) account for more than 99% of businesses in Myanmar. The majority of these businesses are a part of the country’s informal economy, which is often cited as one of the world’s largest in comparison to the size of the formal economy. As a primary source of local employment, especially in rural communities, these businesses play an increasingly important role in the socio-economic development of the country as it transitions to a market-based economy.
Ranging from just one employee to as many as 250, MSMEs often lack access to the working capital needed to expand and generate more revenue. This is especially true among the smallest players in this category, the micro-businesses. In Myanmar, micro-entrepreneurs can be anything from rice traders and clothing retailers to artisan weavers and vegetable venders. In rural areas where formal employment opportunities are scarce, these micro-businesses support the lives of many families.
Proximity Finance, the microfinance business unit of Proximity Designs, recognizes the potential of micro-entrepreneurs to drive local economic development in rural areas. Proximity Finance’s Enterprise Loan product, which the organization started offering in 2017, seeks to fill the unmet financing need of these entrepreneurs and promote the growth of their businesses. Stronger businesses can lead to increased family incomes and, ultimately, improved livelihoods.
The Enterprise Loan product was first piloted out of Proximity Finance’s branch in Pyapon, in the Ayeyarwady Delta region of Myanmar. Today, enterprise loans represent about 9% of Proximity Finance’s overall loan portfolio, but they represent close to 30% of the loan portfolio in Pyapon. According to the Pyapon Branch Manager, Ko Phyo Min Zaw, there is significant potential to expand the enterprise loan portfolio in the area.
Proximity Finance typically makes enterprise loans to a group of micro-entrepreneurs, like the four women from Pyapon pictured at the top of this page. Each of these women have used their enterprise loans for working capital to restock and grow their businesses.
Ma San San Maw is the group leader, who makes sure that the other women in the group pay back their loans in a timely manner. She balances her income between her job at a local government branch and a small retail business that sells fabrics. She has a husband and three daughters, one of whom also works at the same office.
Ma Tin Nyunt manages her business with her husband and three children. They make snacks out of vermicelli rice noodles and dried bananas, among other ingredients, which they sell locally in the Pyapon market. Ma Tin Nyunt hopes to one day diversify her family’s income by raising ducks for commercial use as well.
Ma Su Su Htay has a small retail business for snacks and lunch food. She sells fresh fish at the market in the morning and pork satay for people on the road outside her home, which many workers use to get to the center of town. She has a husband and three children who support her and the family business.
Ma Su Su Htwe has a small retail business that sells fresh fish at the local market, like Ma Su Su Htay. She spends much of her time taking care of her five children with her husband, who is a carpenter. They balance these two sources of income to pay for their children’s school fees and support the family.
On the day that these photos were taken in November 2018, each of these women had just paid back the final installment of their second enterprise loan from Proximity Finance — a 6-month loan of 3 lakhs (or 300,000 Burmese kyat, about USD $200). Now, they are eligible for a larger loan with a longer tenor, up to 6 lakhs (about USD $400) over 12 months. As a microfinance institution that is highly focused on designing and delivering appropriately structured financial products to rural entrepreneurs, Proximity Finance likes to grow with its enterprise clients.
Their relationship with Proximity Finance over the past year has had a very tangible impact on their businesses and their lives. Before Proximity Finance, these four women had to borrow from informal lenders at interest rates above 20% per month. This prevented them from accessing the appropriate amount of working capital they needed for their businesses. The interest rate on their enterprise loans is just 2.5%, which makes a significant difference in their families’ incomes.
Thanks to Proximity Finance, we have been able to double the size of our businesses in the past year. We hope to continue growing with them.—Ma San San Maw
They say they are very fortunate to have heard of Proximity Finance a year ago, and they frequently recommend the institution to others with similar working capital needs.
With the help of Proximity Finance, these women are confident that their businesses will continue to expand and increase their family incomes, allowing them to support their children’s education, make household improvements, and further the development of their community in Pyapon.
Proximity Finance has been a part of MCE Social Capital’s Microfinance Institution (MFI) portfolio since September 2017, when MCE made its first loan of $1,500,000 to the institution. MCE is proud to support Proximity Finance as an investor and promote the economic development of rural entrepreneurs in Myanmar.
Story and photos by Harrison Pharamond, MCE Impact Analyst and Communications Associate
