Myanmar Junta Drives Largest Micro Lender Out of Business

Myanmar’s largest micro lender, Pact Global Microfinance Fund (PGMF), began closing its operations in the country late Monday and will cease them altogether on Friday, saying demands by the junta had made it impossible to continue its efforts to serve low-income households, including those with no access to the formal banking system, The Irrawaddy reports.

“We have sadly concluded that we can no longer operate in the country despite working diligently over the last two years to persuade the government in Myanmar to allow the organization to continue serving hundreds of thousands of borrowers and savers,” said Ellen Varney, Chair of the Board of the PGMF.

PGMF is the microfinance unit of PACT, an international nongovernmental organization (NGO).

In its statement, PGMF said new regulations, as well the demands of the regime to hand over its assets, made it impossible to continue operating in Myanmar.

The Myanmar Registration Law, enacted by the junta in 2022, imposes criminal penalties, including imprisonment, on NGOs for not complying with its registration rules.

It also forbids NGOs from offering microfinance in Myanmar.

The regime refused to allow the non-profit micro lender to register as a commercial entity, which could have allowed it to continue to provide microfinance loans under the new law.

It had been told by junta authorities that if it agreed to share its profits and give all of its assets to the regime in the future it could continue to operate, according to PGMF.

These demands would have put PGMF in breach of U.S. sanctions on the junta.

PGMF announced its closure after forgiving more than US$156 million in outstanding loans to 890,000 borrowers and setting aside money to repay investors.

The fund has been providing micro loans, primarily to women in rural areas, for more than 25 years.

It will cease all of its operation in Myanmar on June 30, the deadline imposed by the junta for it to comply with its new regulations.

“By denying us the ability to register, the government has forced us to either leave or to operate illegally,” said Ellen Varney.

PGMF also said that its future was threatened last year when the regime banned new loans to any clients.

Visas for the PMGF’s senior leadership were denied, and also it faced strict foreign-exchange controls that effectively block external transactions, including interest payments to its creditors.

Microfinance organizations are not permitted to make payments on principal for any foreign debt.

PGMF has set aside money to repay its investors. It is now up to the junta to approve the repayments.

Over its more than 25 years in Myanmar, it has reached 15,000 villages and had more than 2.3 million clients, 99 percent of whom were woman.

A major investor in PMGF, the Swiss Investment Fund for Emerging Markets, said it had “a strong social mission to help alleviate poverty in Myanmar and increase financial inclusion.”

“This is demonstrated by its successful group lending approach, its outreach to rural areas (85%), the percentage of female borrowers (98%), and its well-developed training programmes for clients. Each client attends non-formal business education classes where they learn how to save and use their loans to develop and grow their income-generating activities,” the Swiss fund said, adding:

“In Myanmar, nearly a third of the population is completely excluded from formal financial services.”