IFC converts loan into equity to own 5% stake in Myanmar’s Yoma Bank

IFC/World Bank HQ. Photo: IFC

The International Finance Corporation (IFC), a member of the World Bank Group, has converted a 2014 loan provided to Yoma Bank, the financial services arm of YSX-listed First Myanmar Investment Co Ltd, into equity to hold a 5 per cent stake in the institution.

The deal makes IFC the first foreign investor in a commercial bank in Myanmar. The conversion from debt to equity was approved by the Central Bank of Myanmar in October last year.

IFC’s engagement with Yoma Bank started in 2014 through a convertible loan of $5 million, about a year after the bank regained its full banking license after the Asian financial crisis. The loan at that time was to help Yoma Bank expand lending to small and medium enterprises and to support the bank’s growth strategy.

“We are pleased to be the first domestic bank to accept a foreign investor as our shareholder. Yoma Bank has partnered with the International Finance Corporation (IFC) over the past five years improving our risk management, corporate governance, and audit capabilities. We welcome IFC to our Board of Directors and look forward to contributing further to the development of Myanmar’s economy,” said Yoma Bank executive chairman Serge Pun.

With IFC’s assistance, Yoma Bank claims to have provided more than 7,000 loans totalling nearly $800 million to SMEs in Myanmar and expanded its outreach from 52 branches to 80.

In early 2019, the Central Bank of Myanmar permitted foreign institutions and investors to pick up an up to 35 per cent stake in local banks. Yoma Bank can still divest another 30 per cent holding to foreign investors.

“We want the highest quality of investors that fit the strong governance culture that we have,” said Hal Bosher, special advisor to the chairman & CEO, Yoma Bank.

He said working with IFC had improved the bank’s credibility. “IFC has been pushing us through cash flow based lending for five years, on top of collateral. We have been doing cash for six years when other banks are taking collateral,” said Bosher.

Apart from Yoma Bank, IFC had provided a convertible loan of $7 million to Myanmar Oriental Bank to finance SMEs.