International Finance Corporation (IFC) becomes the first international investor in a commercial bank in Myanmar

Yoma Bank has become Myanmar’s first commercial lender with a foreign stakeholder following a decision by the International Finance Corporation (IFC) to convert a US$5 million loan into a five percent equity shareholding.

The IFC, the investment arm of the World Bank Group, provided the convertible loan package to Yoma Bank in 2014 to help it scale up lending to small and medium-sized enterprises (SMEs). So far the institution has helped Yoma provide over 7000 loans worth around US$800 million to SMEs in the country and increase the bank’s outreach from 52 branches to 80.

It also issued a $7 million convertible loan to Myanmar Oriental Bank (MOB) in 2017 for the same purposes.

The move will boost confidence among other foreign banks interested in taking a stake in Myanmar banks, according to business information firm Frontier Myanmar Research (FMR).

Thirteen foreign banks have branches in the country while another 51 banks and finance companies have representative offices, according to central bank information. Twenty-seven local banks are registered. The Myanmar Times understands that at least four other commercial banks are in discussions with foreign investors.

Yoma Bank chair Serge Pun said the bank was pleased to be the first domestic bank to accept a foreign investor as shareholder.

“Yoma Bank has partnered with the International Finance Corporation 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,” he commented.

A subsidiary of Yangon-listed First Myanmar Investment (FMI), Yoma Bank is Myanmar’s fourth largest private lender by assets, after KBZ, AYA and CB banks. IFC’s conversion from debt to equity in Yoma Bank was approved by the Central Bank of Myanmar last October.

The new Companies Law, enforced in August 2018, permits foreign investors to acquire up to a 35pc stake in local companies. The central bank in January followed up with the liberalisation of the banking sector.

Vikram Kumar, IFC Country Manager for Myanmar and Thailand, said this will help Yoma further expand its product offerings and meet Myanmar’s financing gap, adding that the bank has followed “global standards of governance diligently.”

The IFC has priced in the possibility of Myanmar returning to the “grey list” of states compiled by the Financial Action Task Force (FATF) when deciding, said Ko Aung Thaw Zin, research analyst at FMR’s financial monitoring services. Hence, “greylisting” is not expected to substantially affect the banking sector reform.

The Paris-based FATF, an intergovernmental organisation, is likely to put the country back on to the list next year.

“In fact, Myanmar was even in the ‘black-list’ when the IFC was supplying loans to Yoma, which means being on the list is not necessarily critical for individual banks,” the analyst added.

The so-called grey list refers to the strategic weaknesses list covering high-risk states, while the more serious black list is reserved for countries with no action plan. Myanmar was on the black list from June 2011 until moving to the grey list in February 2016 for less than a year.

Ko Aung Thaw Zin said [Yoma Bank's] size, products, technology and transparency are attractive to international financial institutions, compared to the opaque operations among some other domestic lenders. Hence IFC’s equity will encourage other players to modernise and become more transparent in a bid to secure foreign investments.

With the IFC’s equity, Yoma Bank can still divest a further 30pc to non-Myanmar investors.

(The Myanmar Times: https://www.mmtimes.com/news/ifc-takes-stake-yoma-bank-first-myanmar.html )

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