MICROCAPITAL BRIEF: Economists Question Myanmar’s (Burma’s) Microfinance Plan Due to Corruption, Macroeconomic Instability

Economists cite corruption and macroeconomic instability as potential threats to effectiveness of a microfinance scheme that is being developed by the government of Myanmar (Burma). In the Shwekyin township of Myanmar, where the government recently experimented with microfinance, the impact in terms of poverty alleviation was reportedly minimal due to corruption whereby government officials either pocketed the money to be loaned or directed loans to family and friends.

Sean Turnell, an economist at Macquarie University in Australia, was quoted by the Norwegian nonprofit Democratic Voice of Burma as stating, “What Burma really needs to lift its rural poor out of poverty, to come up with decent and well-capitalized rural financial institutions, and to create a functioning financial system more broadly.” Mr Turnell added that such a financial system “would also stem the influence of businessmen known to be close to top-level government figures, whom with little legitimate competition have been able to open banks and major companies and increasingly orchestrate the direction of Burma’s economy.”

Expressing the importance of job creation over microloans, an unnamed resident of Shwekyin commented to the Democratic Voice of Burma, “If they give out a MMK 30,000 (USD 40) loan, for example, one can pay back other urgent debts but have no chance to save enough to repay the loans. But it would be different if people are provided with something to invest in.”

The US-based nonprofit microfinance information exchange has no data on microfinance institutions operating in Myanmar, although some lending activity is noted in a July 1 MicroCapital story.

By Carol Kim, Research Associate

Sources and Additional Resources:

Democratic Voice of Burma: “Microfinance plan met with caution”, August 2011, http://www.dvb.no/news/microfinance-plan-met-with-caution/16940

MicroCapital.org: “MICROCAPITAL BRIEF: Myanmar Plans Microfinance Expansion in Rural Communities”, July 1, 2011, https://www.microcapital.org/microcapital-brief-myanmar-plans-microfinance-expansion-in-rural-communities/

MicroCapital.org: “MICROCAPITAL BRIEF: Myanmar’s (Burma’s) Banned Opposition Party, National League for Democracy (NLD) to Launch Microfinance Program”, May 31, 2011, https://www.microcapital.org/microcapital-brief-myanmar’s-burma-banned-opposition-party-national-league-for-democracy-nld-to-launch-microfinance-program/

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