MICROFINANCE PAPER WRAP-UP: “Myanmar: Demand, Supply, Policy and Regulation;” by Doubell Chamberlain et al; published by the Centre for Financial Regulation & Inclusion (CENFRI)

“Myanmar: Demand, Supply, Policy and Regulation;” by Doubell Chamberlain, Hennie Bester, Herman Smit, Christiaan Loots, Shirley Mburu, Ahmed Dermish, Lara Gidvani and David Saunders; published as a Making Access Possible (MAP) Study Synthesis Note by the Centre for Financial Regulation & Inclusion (CENFRI); 2014; 41 pages; available at     http://cenfri.org/documents/MAP/2014/MAP%20Myanmar%20Synthesis%20Note.pdf

This document covers an assessment of the retail financial services market in Myanmar as performed by the Making Access Possible (MAP) program, which was developed by the United Nations Capital Development Fund (UNCDF) to support global financial inclusion. The findings of the supply-side analysis cover the microfinance sector as well as the availability of savings, credit, insurance and various payment methods. The results of the demand-side analysis include the “access, usage, perceptions and attributes” of financial services. The findings are based on qualitative and quantitative data sourced from focus group discussions, home visits, “key informant interviews” and the Myanmar FinScope Survey 2013, which was performed by Myanmar Survey Research (MSR).

The authors describe Myanmar as the poorest country in Southeast Asia, with a population of 60.9 million people, 39 million of whom are adults. Seven out of 10 individuals live in rural areas, and the average daily income is USD 3.50 per person. In terms of financial access, 30 percent of adults use regulated financial service providers including banks, microfinance institutions (MFIs), co-operatives and state-regulated pawnshops; 6 percent of adults use more than one regulated financial product. Twenty-one percent of adults rely on unregulated financial service providers including “rice specialization companies,” “agricultural input providers,” informal money-lenders, community-based assistance groups and informal pawnshops, which often offer their services at “substantially higher cost” than regulated providers. The study indicates that rural areas have slightly better access to regulated financial services than urban areas due to government-led measures and a developing commercial banking sector that serves rural as well as urban areas. MFIs serve approximately 700,000 clients in the country.

The study identifies five financial inclusion target groups in Myanmar: “farmers,” “formal enterprises,” salaried consumers, “informal enterprises;” and consumers that work in the informal sector. Farmers constitute the largest group and the most users of regulated credit in the country. Formal enterprises report the lowest uptake of regulated credit. One quarter of the “formal consumers,” who are employed in the formal private sector or in the public sector, use regulated financial institutions. Informal enterprises and “informal consumers,” including casual laborers, the informally employed and those who rely on remittances, are the most financially excluded.

The authors conclude that Myanmar’s financial service providers generally struggle with capital constraints. Credit providers, MFIs and cooperatives rely on non-commercial “mandated” wholesale funding, subsidized capital injections and donor funding, as opposed to commercial funding. Commercial offerings have not achieved significant scale in funding financial services for low-income urban and rural residents. The electronic payments network is limited, and the authors argue that the country’s banking systems require modernization, primarily by the extension of mobile payments, branch infrastructure and agent networks. Agricultural credit products exclude certain groups of farmers based on farm size or crop type. The authors argue that improving the quantity and terms of “agricultural input credit” would increase agricultural productivity. Formalizing unsecured credit would be desirable too, but would require regulatory adjustments including increasing maximum microfinance interest rates and loan sizes. Additionally, the country’s retail insurance sector is underdeveloped with health, funeral, agricultural and credit life insurance products unavailable despite the fact that some of these products could offer collateral to secure credit. Unsecured credit is another deficit of the market.

The authors acknowledge that the government of Myanmar has made progress in financial inclusion by providing government-led financial services, liberalizing the market and strengthening regulatory systems. In order to further expand financial inclusion and improve the quality and range of available financial services, the authors suggest that the government implement the measures: (1) increase the availability of electronic payments; (2) provide low-cost, short-term savings vehicles; (3) extend the availability of other formal and regulated savings options; (4) improve the quantity, terms and risk profile of loans for agricultural inputs; (5) increase the availability of unsecured credit; (6) grow the insurance product portfolio; and (7) develop insurance products to be used as collateral for extending credit.

By Alíz Crowley, Research Associate

About Centre for Financial Regulation & Inclusion (CENFRI)

Headquartered in Cape Town, South Africa, the Centre for Financial Regulation & Inclusion (CENFRI) is a nonprofit organization that aims to support financial sector development and financial inclusion by facilitating improved financial services regulation. In addition, CENFRI conducts research, provides advice and develops capacity building programs for regulatory authorities and other stakeholders in the financial services sector. As of 2014, CENFRI focuses on microinsurance, health financing and insurance, anti-money laundering / combating the financing of terrorism (AML/CFT), retail payment systems, and money transfers. CENFRI is funded through FinMark Trust of Johannesburg, South Africa.

Sources and Additional Resources

Centre for Financial Regulation & Inclusion (CENFRI), “Myanmar: Demand, Supply, Policy and Regulation;” Making Access Possible (MAP) Study Synthesis

MicroCapital, June 21, 2014, United Nations Development Program (UNDP) Transfers Microfinance Portfolio in Myanmar to Pact Global Microfinance Fund

MicroCapital, May 30, 2014, Myanmar Ministry of Cooperatives Allocates $52m for Microfinance in Agriculture

MicroCapital, March 3, 2014, Microfinance Supervisory Committee of Myanmar Caps Microloans at $509, Interest Rates at 2.5% per Month

MicroCapital Universe Profile: Centre for Financial Regulation & Inclusion (CENFRI)

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