German development finance institution Deutsche Investitions- und Entwicklungsgesellschaft (DEG) has committed $6 million in senior unsecured long-term loan to LOLC Myanmar Micro Finance Co Ltd.
In a disclosure, DEG said the funding will be used by LOLC Myanmar, a greenfield microfinance institution established in 2013, for on-lending to the firm’s micro-finance borrowers.
LOLC Myanmar is an offspring of LOLC in Sri Lanka. The firm provides micro-credits, micro-savings, and non-financial services like financial literacy training to underprivileged people who are mostly unbanked.
DEG said the funding contributes to its mission of supporting frontier markets with high development impact. The investment also fits well into DEG’s strategic objective of providing risk capital to small and mid-sized companies in emerging markets.
The German lender said LOLC Myanmar’s borrowers belong to the low income, partly rural population that otherwise lacks access to finance. The availability of long-term debt funding, DEG said, is currently the most important impediment to growth.
“Due to the relatively small size of the financial sector in Myanmar, expanding microfinance services will have a noticeable effect on income generation for the local population who use the microcredits mostly for productive purposes to increase their household income,” DEG said.
On its website, LOLC Myanmar said it has significant investments in Cambodia, Myanmar, Pakistan, and Indonesia and it continues to expand its international presence by actively seeking new opportunities in the region.
DEG has been actively investing and supporting enterprises and organisations in Southeast Asia. In the fourth quarter of 2018 alone, DEG significantly increased its Asia exposure by investing about $454 million against a cumulative investment of $115.06 million in the three preceding quarters.
DEG, a subsidiary of KfW Group, invested in 21 companies across India, China, Southeast Asia and other Asian nations during the fourth quarter of last year, according to information available on its website. The investments were a mix of private equity, co-investments, and debt financing.
Here are some of its latest funding commitments in the region:-
Cambodia’s ACLEDA Bank gets $20m loan from DEG
In July, DEG committed a $20-million long-term loan to ACLEDA Bank, a non-governmental organisation for micro, small, and medium enterprises’ development and credit in Cambodia.
The long-term loan, according to DEG’s disclosure, will help strengthen the bank’s capital base and support its lending operations to local MSMEs and women-owned small businesses in Cambodia.
ACLEDA’s digitalisation strategy will also contribute to improving the quality of financial services by broadening access to digital financial products and improving banking services delivery via digital channels, DEG said.
DEG commits $20m to Philippines-focused Navegar’s Fund II
The German investor disclosed that it has committed an investment of $20 million in the Fund II of Philippines-focused private equity firm Navegar. Navegar II LP is a $150-million fund that seeks to invest significant minority stakes in consumer-related industries and businesses.
Navegar made an initial close of the new fund in July at $87.1 million, with 20 investors committing to the vehicle. DEG said it invests in Navegar as the fund would support private equity investments which are relatively limited in the Philippines.
“DEG supports fund managers which are sustainably investing into growing companies in emerging markets such as the Philippines,” it added.
Thai Credit Retail Bank gets $11.8m from DEG
In Thailand, DEG committed $11.8 million in Thai Credit Retail Bank (TCRB), the only bank in Thailand operating with a retail banking license, according to a June disclosure. The bank is one of the leaders in the country’s micro-SME and microfinance.
DEG said SMEs, which contribute 40 per cent to Thailand’s GDP and employs 80 per cent of the working population, still struggle to get access to bank credit.