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By granting Early Dawn Microfinance Company Ltd. (DAWN) a loan in local currency amounting to USD 4 million, Proparco is supporting a microfinance institution with an almost exclusively female clientele, in a complex environment where financial inclusion is low.

In Myanmar, financial inclusion remains low: in 2019, around 30% of the adult population had a bank account. Financial institutions also find it difficult to access resources to finance their growth. In this particular context, Proparco's support to DAWN enables it to support the economic and social development of populations excluded from traditional financing, and in particular women. Moreover, gender inequity and vulnerabilities are magnified during times of crises. As seen during previous health crises, women are amongst the most negatively affected. In light of the ongoing Covid-19 crisis, Proparco’s support to DAWN is all the more important, as the institution continues to promote its women-centric model against the backdrop of a challenging operating environment.

Originally created as the microfinance programme of the British NGO Save the Children, DAWN is now owned by the NGO Accion, as well as by FMO and the sustainable bank Triodos. It has been operating since 2015, and is now in 7 regions across the country. Totaling more than 260,000 clients, it was the third largest microfinance institution in Myanmar in terms of active borrowers as of 31 March 2020. DAWN mainly offers group lending products aimed at an exclusively female clientele: mainly women micro-entrepreneurs active in the commercial sector, as well as in the service sector and in agriculture and livestock breeding.

A project that supports the financial inclusion and employment of the local population

By supporting DAWN's expansion, this project is expected to help more than 66,000 people access quality microfinance products and services, and will therefore have a significant impact on the financial inclusion of vulnerable populations - meeting the Sustainable Development Goal 10, Reduced Inequalities. On the social level, it will contribute to the employment and training of local populations, especially women. DAWN plans to hire more than 800 additional people by 2021 to support its growth, maintaining the 70% rate of jobs held by women, as is already the case after its 2018 wave of recruitments. The project should also support more than 66,000 jobs among DAWN's clients. In total, the project is thus expected to support about 66,800 jobs in Myanmar, contributing to Sustainable Development Goal 8, Decent Work and Economic Growth.

In addition, this project will help bridge some of Myanmar’s long-standing socioeconomic gaps by strengthening women’s capacity for a sustainable living in a country where female labour participation remains at a low 47%, compared to 77% for men. Significantly, the project highlights Proparco’s continuing commitment to the U.N.’s Sustainable Development Goal on ‘Gender Equality’ (SDG 5).

The TCX-LIFT Program

The local currency loan provided by Proparco to DAWN is part of the TCX-LIFT Program. Within this program the Livelihoods and Food Security Trust Fund (LIFT – a multi-donor fund which goal is to sustainably reduce the number of people in Myanmar living in poverty) has made available a fund to subsidize interest rates for Myanmar Kyat-denominated loans that are provided by international investors, like Proparco, to Microfinance Institutions in the country.

The Currency Exchange Fund (TCX) is managing the subsidy and, as the hedging counterparty for Proparco, has allocated a specific amount to subsidize the final local currency interest rate for DAWN. The subsidy is currently necessary as the volatility of the Myanmar kyat, combined with the regulatory interest rate cap, made lending in local currency at commercial levels very difficult for investors and MFIs.

LIFT and TCX developed this unique partnership to promote investment in Myanmar after the country progressively opened up in the past yeast and specifically focus on promoting financial inclusion through local currency FX risk-free investments from international investors.