Country: Myanmar
Sector: Agri-machinery rental, potential crop aggregation
Investment: Additional tractors and harvesters
Total estimated capital expenditure: USD 400.000, further capital rounds expected
Investment type: Equity
Amount invested by Kampani: USD 150.000
Co-investor: The Yield Lab USD 100.000
In portfolio since: May 2020
Deal sourced by: Alterfin
The business
Tun Yat is a limited liability corporation in operating in Myanmar, with parent company registration in Singapore. This is a common practice in the country. Tun Yat specializes in renting farming equipment to local producers who cannot afford to purchase their own machinery. In 2019, they served over 2000 clients, a majority of whom are rice farmers.
Currently, Tun Yat owns four harvesters (three rice, one corn) and one tractor. Farmers can request the services via an app. In addition to renting out machinery with an operator, Tun Yat also trains machine owners and drivers and connect them to farmers in need of their services.
Tun Yat has completed several equity rounds and is now adequately capitalized. With this capital round, Tun Yat expects to be able to generate economies of scale, improving its margins. The current shareholdership is represented by the graph below.
The investment
The connection between Kampani and Tun Yat was established by Alterfin. Alterfin has no prior relationship with Tun Yat but learned of the organization through a partner, Proximity Finance. Its mother NGO, Proximity Designs, is a co-founder and now shareholder of Tun Yat. Kampani, alongside the Yield Lab, completed the transaction in May 2020.
With the additional equity provided by Kampani and the Yield Lab, Tun Yat plans to expand to reach a larger customer base and increase their overall impact. To do so, their goals include:
- opening a second district hub in Magway
- increasing the number of owned machines
- improving management of seasonality by diversifying crops they can serve (e.g. corn and beans)
- linking up farmers who have no financing with MFI’s
- scaling up spare part sales
The social impact
Myanmar is highly dependent on agriculture as it accounts for 30% of its GDP and employs over 70% of the population. 95% of agricultural work is done by smallholder farmers. However, due to several compounding factors including lack of access to irrigation, machinery, infrastructure, and adequate funding, productivity in the agri-sector rests around 20%.
Myanmar farmers only earn about 1.80 – 2.50 USD per day in the monsoon season, compared to 10.00 – 16.50 USD in Thailand and 7.80 USD in the Philippines. On top of the low yield overall, farmers annually suffer huge losses (according to government estimates, 40 to 60% of the crops produced seasonally) because of the lack of post-harvest technology, machinery such as dryers and harvesters, and warehouses.
Tun Yat aims to address these market inefficiencies and support farmers throughout the country. Their mission, “Save and Harvest More, Prosperity for All,” closely aligns with Kampani’s as their business development is driven by farmer demands and targets smallholder famers. Specifically, they have focused on developing financing mechanisms, encouraging farmers to build cash reserves to better manage cash flows, and are currently working on a crop aggregation pilot to increase yield productivity.
Furthermore, Tun Yat has a policy that 60% of their clientele will have roughly two hectares or less of farmland. In other words, it has an explicit focus on supporting small producers.
Finally, Tun Yat has a programme in place to allow for gradual farmer-ownership of the company.
