South Korean financial companies are rushing into Myanmar as they see fresh investment opportunities in the country that has started to open up after almost 50 years of military rule. In addition to leading lenders Shinhan Bank Co. and Woori Bank Co. and personal loan provider BNK Capital Co., IBK Capital Corp. is expected to make its entry into the Southeast Asian country’s microcredit market by offering small loans of each under 5 million won ($4,280).

According to multiple sources from the financial industry on Wednesday, IBK Capital, a venture capital arm of Industrial Bank of Korea, is waiting for final approval from the Myanmar government to begin operations as a micro finance institute (MFI) in the first half of the year. IBK Capital, which was given preliminary approval late last year, is expected to launch its credit business in Insein, a run-down area in northern Yangon, the country’s commercial and financial capital, and Mandalay, a city in central Myanmar.

IBK Capital plans to engage in the country’s micro-lending business by providing various types of agricultural, medical, and student loans to low-income households, workers, and small businesses. It will offer unsecured loans within the limited range of under 5 million kyats. The Korean capital firm is hoping to expand and open new business branches in nearby Southeast Asian countries such as Laos based on its experience of managing operations and workforce in Myanmar.

Meanwhile, several Korean financial institutions have already launched their businesses in Myanmar - a country often referred to as the “Pearl of Indochina.”

BNK Capital was given permission in August 2014, to operate credit business in Yangon. It is the only Korean financial firm to have business network in all three countries - Cambodia, Laos, and Myanmar - that are relatively unfamiliar markets to Korean lenders but with growth potential. In Myanmar, BNK Capital is engaged in the business of providing small loans and credit loans to local financial consumers. The average amount of extended loans per consumer is very small between 200,000 and 300,000 won but it is considered a profitable business for BNK Capital as it receives about an average of 30 percent on loan interest on top of extra fee charge of 1 percent. The firm expects to make profit starting this year.

Capital firms are pouring into Myanmar as they see much business potential in the country. Myanmar’s financial industry is yet small with the total asset of the largest financial company reaching 6 trillion won and unclear boundary line between the banking and non-banking institute. Whether it be a capital firm or a bank operating in Myanmar, they are given similar business opportunities.

Meanwhile, Myanmar is considered a country with low default rate as the people are highly superstitious and believe they will suffer in their next lives if they do not pay back debt. An official from BNK Capital said that it is very rare for people in Myanmar to be in arrears as every town is led by a chief who evaluates their credit and knocks on their doors if their loan payment is overdue.

Among Korea’s leading lenders, Shinhan Bank was the first to acquire prelkiminary permission from the Myanmar government early this month to set up a local branch. The bank is expected to offer financial services to Korean companies entering the Southeast Asian country once it gets a final nod. Its sister company Shinhan Card Co. is also expected to be the first among Korean card companies to establish an overseas subsidiary in Myanmar to provide a small loan service. The company aims to set up a corporate in the first half of this year and receive license from Myanmar authorities in the second half to engage in small loan business.

Woori Bank has also set up Woori Finance Myanmar, a microfinance subsidiary, in November last year, with $2 million capital. It offers agricultural and student loans to financial consumers in Myanmar at an interest rate similar to what local banks offer. The institution is expected to also dive into Myanmar’s bank industry and offer other financial services. Woori Bank decided to offer small loan services first before entering into the bank industry because the operation of a bank branch in Myanmar is limited to only local people and businesses based on its own regulation.

Sohn Tae-seung, head of Woori Bank’s global business unit, said that the step by step procedure of how the lender is planning its entry into Myanmar shows it is fully determined to offer financial services to local consumers and businesses.

By Park Joon-hyung, Chung Seok-woo, Park Yoon-ye

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]