MICROCAPITAL BRIEF: Proximity Finance Raises $14m in Equity from Finnfund, Nordic Microfinance Initiative, Proparco to Support Farmers in Myanmar

Proximity Finance, a unit of Myanmar-focused social enterprise Proximity Designs, recently agreed to a package of equity investments totaling USD 14 million in equal shares from three European institutional investors, Proparco (Promotion et Participation pour la Coopération Économique), the Nordic Microfinance Initiative (NMI) and Finnfund. The deal, which is pending regulatory approval, would support Proximity Finance’s services to small-scale, rural farmers in Myanmar, including plans to disburse 1.5 million loans within four years and expand its active clientele by threefold, while increasing its loan cap and rolling out “a new individual lending product and savings products tailored for small farmers.” As of July 2020, the lender only lends via group methodologies. Proximity Designs will remain a shareholder and the primary operator of Proximity Finance. The sizes of the stakes that the four investors will hold remain confidential.

Proparco’s Regional Director for North and South-East Asia, Magali Roux, maintains, “With its smallholder farmer focus, Proximity Finance addresses the critical funding gaps in the country’s rural credit sector and aims to reshape the financial landscape for 30+ million underserved rural people.”

As 60 percent of Proximity Finance’s clients are female, the investment is classified under the 2X Women’s Initiative, through which the US government’s International Development Finance Corporation (DFC) has led the Group of Seven (G7) large economies and other investors in committing a total of “USD 2 billion of investment in projects that are owned by women, led by women, or provide a product or service that empowers women.”

Proximity Finance was established in 2010 as a unit of Proximity Designs, a social enterprise in the US that serves Myanmar exclusively. Proximity Designs aims to increase the incomes of small, rural and family farms in Myanmar through its “affordable, income-boosting products.” It offers technical assistance and research services as well as – through Proximity Finance – loans for farming, raising livestock, small business and relocation. Per its December 2019 quarterly report, Proximity Designs had 3-month operating income of USD 3.67 million. Its “Farm Finance” platform had 3-month net operating profit of USD 359,000 on a loan portfolio of MMK 48.9 billion (USD 34.9 million). This platform had 112,000 borrowers, each of whom is also required to maintain a savings account. The total amount of these savings has not been released.

NMI was founded in 2008 with the goal of creating jobs and wealth via financial inclusion. It is owned by several private entities and two government-backed institutions, Norway’s Norfund and the Danish Investment Fund for Developing Countries, which also is known by its Danish acronym IFU. NMI’s five funds hold aggregate assets of USD 280 million as of 2020, including 18 direct investments in six countries that reach 9 million people, of whom 90 percent are women. The funds have also placed a total of seven investments in other microfinance investment vehicles. In addition to four microfinance funds, NMI manages the Climate Smart Fund, which offers “attractive loans and agricultural assistance [to help] Indonesian smallholders intensify work on their existing plots instead of clearing rainforest.” NMI reports a history of generating returns to investors of 3 percent to 5 percent per year.

Established in Finland in 1980, Finnfund is 94-percent owned by the Finnish state. It is a development finance institution investing in middle- and low-income countries, with a particular focus on sectors such as “renewable energy, sustainable forestry, sustainable agriculture and financial institutions.” Finnfund provides EUR 200 million (USD 225 million) to EUR 250 million (USD 280 million) in funding to approximately 25 projects each year. As of 2019, Finnfund reported a portfolio of EUR 617 million (USD 693 million).

Proparco is the private-sector financing subsidiary of the Agence Française de Développement (AFD) Group, which is composed of AFD and Proparco. Proparco funds financial institutions and other businesses in Africa, Asia, Latin America and the Middle East in sectors such as agribusiness, education, and renewable energy. In 2019, the AFD Group reached total commitments of EUR 11.4 billion (USD 12.8 billion), including EUR 1.6 billion (USD 1.8 billion) signed by Proparco.

By Jessica McLeod, Research Associate

Sources and Additional Resources

Direct contact with Proximity Designs

Proximity Finance press release
https://www.nmimicro.no/media/d3bb4b156f0b9faf956beab6a8019442/Proximity%20Finance_Equity%20Raise_Deal%20Announcement%20Release_FINAL.pdf

Finnfund homepage
https://www.finnfund.fi/

NMI homepage
https://www.nmimicro.no/

Proparco homepage
https://www.proparco.fr/

2X Challenge website
https://www.2xchallenge.org/

DFC’s “2X Women’s Initiative”
https://www.dfc.gov/our-work/2x-womens-initiative

Proximity Designs report for the quarter ending December 2019
https://proximitydesigns.org/wp-content/uploads/Proximity-Designs_FY20_Q2-Report.pdf

Finnfund Annual Review 2019
https://www.finnfund.fi/wp-content/uploads/2020/04/Finnfund_Annual_Review_2019.pdf

Proparco financial information
https://www.proparco.fr/en/ressources/proparco-key-figures-2018