BOOSTING THE MYANMAR MICROFINANCE INDUSTRY AND MAKING IT SAFE FOR THE BORROWERS

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Despite the minimal profits, Myanmar’s  microfinance industry continue to attract international and domestic investors. Currently dominated by international development agencies, private investors are gradually entering the market, buoyed by the success of microfinance institutions (MFI) in the neighboring countries of Bangladesh, Cambodia and the Philippines where commercialization of the industry increased the number of people with access to financial services.

Microfinance is effective in ‘democratizing’ credit by providing services to borrowers considered by banks as ‘un-bankable’.  People who cannot pass stringent bank requirements are able to borrow from MFIs through loan products that do not require real estate collaterals.

This makes MFIs a different breed of financial service provider. It is a business that has a double bottom line – profit and a social responsibility.  No wonder many entrepreneurs are joining the bandwagon.  As of October 2016, there are 168 licensed MFIs, more than half are local companies while 28 of these are foreign companies. Loan portfolio is at 1,909,629.38 million kyats, released to 2,264,495 borrowers from 221 townships.

Changes in an evolving industry

In the rural areas, people are still wary of formal financial institutions. When cash is needed, the reflex action is to pawn jewelleries, the traditional savings instrument easiest to monetize.

If there are no jewelleries to pawn, informal moneylenders are then sought, the   lender of last resort.  Informal moneylenders are often demonized as bloodsucking monsters charging usurious interest rate and fleecing their clients to the last drop of blood. But a closer look would reveal that they are but the relatives, friends and people who have extra cash and are willing to help somebody in need.

MFIs are supposed to make informal moneylenders obsolete. It is expected to replace the informal transactions with more formal arrangements as a platform for a wide range of financial services – savings, credit, insurance and other services. It also considers the safety of the borrowers as the players will be regulated and supervised by a government agency.

Myanmar’s   experience in socialism brought about the catastrophic collapse of the country’s financial system.  A series of financial crisis erased whatever trust is there with the financial system. Hoping to prevent the recurrence of financial crisis,   stringent policies aimed at strengthening the financial system were put in place, but instead turned out to be an overprotective barrier that limited the flow of finances to those who needed it most.

The microfinance industry felt this pressure with the restrictive provisions of the Microfinance Law.  Funds inflow were not allowed and there were caps on the loan amount and the interest rate on loans. Savings from the borrowers were also limited. The initial euphoria diminished as the MFIs grapple to stay afloat amidst the restrictions.

Five years later, changes for the better were introduced by the Financial Regulatory Department (FRD), the government agency under the Ministry of Finance and Planning regulating the industry. Previously the regulatory agency for pawnshops, it evolved into the country’s guardian of institutions providing financial services to the unbanked.  With five years under its belt, the agency is more than ready to steer the industry into   greater heights.

Attracting more funds

Funds from the government are not enough to address the credit needs in the rural areas. Even with donor funds it cannot cope with the increasing needs of the emerging micro, small and medium enterprises (MSME). Harnessing the private sector is one of the measures to enable the microfinance industry to mobilize funds and channel it where it is needed most. The growth and success of microfinance industries in neighboring countries can be attributed to private sector participation.

Towards this end, FRD adjusted its policies and allow MFIs to borrow funds, opening the floodgates to loans locally and from investors abroad. The only condition is that it should be approved by the Central Bank. Socially-responsible investment companies supporting MFIs in other Asian countries are now looking at Myanmar as the next destination of their support. There is still an issue in the foreign exchange as the kyats fluctuate in the market, but suffice it to say that one of the roadblocks to more funds has been addressed.

Parallel to this is the policy in mobilizing savings.  It does not only allow borrowers to avail of the safekeeping facilities of the MFI, it also allows the use of the resources within the community. Savings mobilization however, is prone to abuse, more particularly the compulsory savings which some MFIs make as a requirement to avail of a loan.

The FRD to this end required that savings should only be mobilized from borrowers and in no way should be collected from non-borrowers. Moreover, compulsory savings should not go beyond 5% of the loan amount. As a sweetener, savings should earn and interest rate of not less than 15% per annum.

Furthermore,  FRD segmented the MFIs and allowed only those that are financially strong to be designated as ‘deposit-taking’ MFIs. Only those with 300 million kyats capital and 3 years’ experience in Myanmar are allowed to be deposit-taking, compared to ordinary MFI that is required only to have a 100 million kyats capital.

Protecting the borrowers

One of the most welcomed changes is the government’s embrace of the Client Protection Principles.  The principles were developed as a result of the excesses of the MFIs at the time when the industry started to commercialize.  As some MFIs saw the ‘wealth at the bottom of the pyramid’,  they  tried to   max out the profits that can be generated from the clients by charging not only high interest rates but other unnecessary fees and deductions, penalties for minor offenses, and other practices inimical to the clients. This is the dark side of the industry commercialization leading to the ’mission drift’ of some big MFIs.

Part of the self-correction efforts of the industry was to create measures that would address the abuses and isolate those who continue to burden the borrowers with lopsided policies. The Social Performance Task Force (SPTF) was formed to manage the assessment of the MFIs’ social performance as a measure that an MFI is not drifting away from its social mission. Later, the Smart Campaign advocated the adoption of the Client Protection Principles to ensure that the features of loan products are not detrimental to the clients.

The microfinance industry now consider social performance and adherence to client protection as an indicator of ‘good housekeeping’ for MFIS. It also became indicators that most funders and investors would like to see before investing in an MFI.

Among the principles adopted by the FRD are:

  1. Appropriate product design and delivery that meet clients’ needs
  2. Prevention of over-indebtedness
  3. Transparency- disseminating information regarding financial services in language that is accessible to the clients
  4. Responsible pricing- ensuring that pricing for financial services does not affect clients negatively
  5. Fair and respectful treatment of clients
  6. Privacy of client data- ensuring the security of client data
  7. Mechanisms for compliant resolution- having in place procedures to resolve disputes with credit bureau or exchange of information

It is expected that the changes will attract more institutions, help improve access to finance and direct more funds to rural areas help in the economic development of the country.

 

Completing the Kayin Project

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Monday will be the culmination of a development project in Kayin State, Myanmar. A conference will showcase the results of the three-year project – a registered cooperative with savings and lending service as well as an e-money service, and an enterprise and agri-business enhancement component for the borrowing members.

In 2014, the project started six months late because of some administrative concerns as the government has to cope with the increase of development agencies flooding the country.  But the project team was able to catch up on the activities and reach the finish line on time.

The results of the project affirmed the tools and methods initially employed in other ASEAN countries and now used in Myanmar. These include savings mobilization techniques, cooperative formation, value chain analysis for agri-commodities and enterprise development.  The tools are now being marketed to other development agencies for replication.

THE CHINA LOAN: Managing Debt and Sustaining Development

eximbank-chi_20131126135212242Addressing financial needs in the rural areas

Initial reports showed that the Ministry of Cooperatives (MOC) disbursed to target recipients throughout the country, the first tranche of the loan extended by the China Exim Bank. A report entitled Rural Development, Socioeconomic Improvement, Poverty Alleviation and the Cooperatives distributed during the celebration of International Cooperatives Day held in Nay Pyi Taw last July 4, stated that 203,539 million Kyats were provided to cooperatives in 307 townships in 15 states/divisions nationwide. The portfolio included the $100 million from the China Exim Bank received in December 2013 and April 2014. Dubbed as Micro Capital Loan, the funds were distributed to individual borrowers at 100,000 Kyats each, for agricultural production or rural enterprises. The report further stated that the lending program registered 100% repayment rate to date.

Prior to its approval, some members of the Pyidaungsu Hluttaw expressed reservations in recommending for the government borrowing from China because of concerns on the management of funds and the capacity of the government to repay the loan. With a ten-year term, the loan is charged with 4.5% p.a. and retailed to individual borrowers at 1.5% per month.

The initial report looked promising and persuaded the Pyidaungsu Hluttaw to approve the second tranche of $300 million. It has improved features, increasing the maximum individual amount at 500,000 Kyats and lowering the interest rate at 1.1%. In addition, $30 million of the tranche was set aside for agricultural mechanization program, with loans devoted to hire-purchase of agricultural machineries.

The hire-purchase scheme for agricultural machinery is another project of the MOC in partnership with the Daedong Industrial Co. of South Korea. The company distributes agricultural machineries such as power tiller, tractor, pumps, transport tractor, lawn mower and trailer. It partnered with the MOC and offered two schemes: direct cash purchase or hire-purchase arrangement. The term of the arrangement is 7 years, with the recipient giving 10% of the purchase price and twice-a-year amortization. Latest data showed 154,289 units of agricultural machineries were distributed through this arrangement.

Contribution to financial inclusion

The China loan contributed to increase access to credit in the countryside. The program enabled people in the rural areas to access financial resources they can use to venture into productive economic activities. It is expected that local economies will be energized as a result of the infusion of fresh financial resources to the communities. Farmers were among the main beneficiaries as most loans were expected to finance agricultural production. It will support purchase of inputs and in some cases, acquisition of farm machineries. The funds may either augment whatever resources from government banks that have been provided as part of other programs.

Gaps, issues and concerns

Despite the supposed benefits, there remain questions on the long term sustainability of the lending program. Foremost among the concerns is the management of funds. There is no question on the capacity of the MOC as a government agency, but the issue is that loan management is not part of the ministry’s core competencies, but that of a financial institution. MOC can best manage the development and institutional strengthening of cooperatives rather than manage loans. Present results may show 100% repayment rate but that may not be the case during repeat loans and in the succeeding loan cycles. Lessons in agricultural finance reflect deterioration in loan portfolio over a long period as the farmers encounter production problems like natural calamities and fluctuations in prices of agricultural products, limiting their ability to pay back loans.

Relative to this issue is the capacity of the conduit institution. It is not workable for the MOC to do direct lending to individual borrowers. It has to wholesale the funds to cooperatives who are more familiar with their members and thus identify who may borrow and who may not. Cooperatives as conduits have to be organizationally strong with the capacity to handle the complexities of managing lending operations. Most of the village-level cooperatives at present may not be strong enough to handle lending operations involving huge amounts.

The present Micro Capital Loan is a catch-all loan product. Appropriate product design is an important element in any lending program and should meet specific needs of various kinds of rural borrowers which can be segmented into three: subsistence-level livelihood activities (like ambulant vendors), micro-enterprises that has attained certain level of stability and business volume (like grocery stores) and agricultural production. Most microfinance practitioners have developed micro-agri loan product considering the distinctiveness of agricultural production.

There was also the concern for the overlapping of the program with the present lending program of the Myanmar Agricultural Development Bank (MADB). The possibility of borrowers receiving loans from both the MADB and the MOC is not farfetched. The fear is that instead of reducing poverty, the program might end up with people deeper in debt.

Risk management is quite limited at this point. No facility for crop insurance that will absorb the shock when calamity occurs. This may limit the number of people who can borrow again after each calamity, and those who cannot borrow from the program may end up back to informal money lenders, and more deeper in debt.

These are some of the issues that have to be addressed immediately to ensure that the program will indeed support sustainable development in the rural areas, and will not end up burdening the people with more debt.

Policy recommendations

Based on the status of the program, three broad strokes can be recommended to make certain that the program will be ready to face challenges soon.

1. Financial institution to manage the lending program

To rationalize the program, it would be best for MOC to focus on the development and strengthening of cooperatives at the grassroots level and leave lending operations to financial institutions. In transition, a department or a special unit within the MOC can be set up to focus on the management of the lending program. The main function of the unit should be to qualify cooperatives who can borrow from the fund, processing disbursements, collection and remedial management for past due accounts.

2. Development of financial intermediary cooperatives.

Cooperatives as conduits of loan funds should be strengthened and upgraded. A capacity building program should be implemented to enhance the capacities of cooperatives. In addition, there is a need to merge small village-level cooperatives into village-tract level or the township level to have economies of scale. Bigger cooperatives with more members and with more financial resources and with full-time staff should also assume financial intermediation functions – mobilizing savings from its members and the community and providing loans to support economic activities of the members. Financial education advocacy will also be an important role of the cooperatives.

3. Integrated agricultural production

Support to agricultural production should be aimed towards integration. At present, MOC initiative supports production stage through the Micro Capital Loan and the farm mechanization. Through the cooperatives, it should be programmed to control the whole value chain of agricultural commodities. This means the cooperatives would also have its own post-harvest facilities and processing facilities, marketing arm and transport facilities. Integrating production through the cooperatives will make possible the farmers’ capacity to control the price of agricultural commodities.

Debts when managed well can be used to facilitate sustainable development, or if not, it can be a burden to taxpayers.

Originally published in Myanmar Insider, August 2015

Microfinance reality check

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The Wall St. Journal recently published an important article on microfinance (http://blogs.wsj.com/indiarealtime/2015/03/18/calls-grow-for-a-new-microloans-model/). The article wasn’t important because what it said was news. The industry has known for years that very few well-designed studies have been able to detect a measurable impact from microfinance on poverty. No, what was important about the article was that if the Wall St Journal has reported it, then it’s certain that the shine the industry got when Mohamed Yunus won the Nobel Peace Prize in  2006 has now completely tarnished.

The problem with that original shine was that it was, well, a bit too bright. The idea that borrowers were investing in their business using microfinance services that were both convenient and affordable became part of the foundational belief system of the industry and its supporters. This belief system held even as the industry shifted from microcredit to microfinance when evidence began to show a limited developmental impact from credit. Under the microfinance model, clients would use credit coupled with savings (or, occasionally, insurance) to raise themselves up out of poverty.

As the Wall St Journal points out, the evidence for this is scant. Demonstrating how the past always finds a way to repeat itself, recently microfinance has morphed into “financial inclusion”, which places heavy emphasis on (mobile) payments to bring those who are neither borrowers or savers into the financial system. How this will lead to socio-economic development is not clear, but it seems that underneath the new paradigm, the old belief that financial access itself confers benefits continues to hold sway.

Financial access is important because financial exclusion is a monumental problem. But financial access is not sufficient. It doesn’t solve problems related to skills and education or household financial management practices. In other words, just because someone has a bank account and access to credit doesn’t make them less poor.

Critics like the Wall St Journal have a field day when the evidence comes to light that finds little correlation between financial access and socio-economic development. And because its attacks the industry’s foundational belief system, this criticism strikes very close to home.

But it’s always been a weak argument. Financial access creates possibilities, not opportunities. Surely, how someone uses financial services matters more than simply having access. But probably not even Warren Buffet would be able to squeeze a lot of additional income from the small farm or retail shop that is the primary livelihood activity for most microfinance clients. As long as the source of income is low-margin and not scalable, even optimum usage of financial services can only have a small impact on income.

Still, there are at least 200 million microfinance clients in the world, and the number keeps growing every year. If the services aren’t “helping”, then why to people keep using them?

The answer is that microfinance services are helping, just not in the way microfinance’s foundational belief system says it does.

A recent CGAP analysis of M-Shwari, a mobile savings and credit provider in Kenya, provides some clues (http://www.cgap.org/sites/default/files/Forum-How-M-Shwari-Works-Apr-2015.pdf). In only two years, M-Shwari has racked up some impressive numbers: 9.2 million deposit accounts, 20.6 million loans, PAR90=2.2%. This is what we’ve been waiting for: massive scale using mobile technology.

But dig a little deeper and you find the following:

  • The number of active savings accounts is 4.7 million — half of all accounts. This is an organization that has only been around for 2 years, and already half their savings accounts are dormant. Based on the numbers they give, those dormant accounts have an average of just $0.40 in them.
  • There has been a total of $1.5bn deposited since launch. A huge number. But the current amount of deposits is just $45.3mn. Just 3% of the funds that have been deposited have stayed on deposit.
  • Why the quick turnover? Because most people make a deposit in order to access the credit service. It seems many borrowers reduced their deposit after they paid off their loan. Many others who didn’t qualify for a loan many also have drawn down their deposit.
  • Still, isn’t it great that someone figured out how to make loans using mobile technology? Well….the average loan balance is less than $10. Loans carry a term of 30 days but can be rolled over.
  • The interest rate is 7.5%/month … and is charged each month the loan is rolled over. That’s basically 7.5% FLAT (90% APR)! And yet surveyed clients said the interest rate was “cheap”.

So what’s going on here? It turns out that only 14% said they borrowed to invest in their business. Most people use it to cover shortfalls in income vs. expenses­­––what the authors of Portfolios of the Poor call “consumption smoothing”.

Although perhaps it is more accurate to call it “household liquidity management”.

The problem for most microfinance clients­­­­, and perhaps the main reason why they do not have access to the mainstream banking system­­, is that their income is not just low, it’s unpredictable. In such circumstances, household liquidity management becomes a regular­––if not daily––activity. And that makes long-term planning more difficult.

This is important because if Warren Buffet really were a  client intending to use microfinance services to build wealth, he would need to think long-term. Delaying current gratification for long-term benefits is the mindset shift that underlies financial literacy.

If few clients actually use microfinance services in the way they original designers of microfinance programs expected them to, that doesn’t mean it is a failure. Microfinance does address the problem of income unpredictability. A stable, reliable source of credit, combined with savings, allows clients to meet their spending needs even as income ebbs and flows.

There is no doubt that this is important. There is no way to get ahead tomorrow if you have to scrounge to find money to eat today. But contributing to better household liquidity management is not, as the Wall St Journal points out, the same as contributing to increased income.

Another reason the Wall St Journal article is important is it because it shines a light on an important issue that the microfinance industry needs to address. A more nuanced analysis of microfinance’s “failure” to deliver the goods might look something like this:

  1. Microfinance says its loans are being used to “invest” in farms/micro-enterprises. This is wrong. The loans are used partly for working capital (purchases of inputs/inventory) but rarely used to expand production or move up the production chain to higher value-added goods/activities.
  2. In fact, there is a possibility that less than 50% of loans actually go into the borrower’s enterprise, with a large proportion being used to smooth consumption. Instead of the loans being used for the business, as the foundational belief system says, in reality the cash flow of the business is the underlying collateral for making a loan that partially finances consumption.
  3. Enabling people with low and unpredictable income to manage household liquidity stop has an enormous positive impact, but it is really only the first step. The next step is to enable people to use the breathing space created by these short-term loans to plan for the long-term. If anything, this is where microfinance has failed. How many MFIs offer long-term savings plans? How many MFIs offer a real investment loan, which would be larger and a longer term than a typical working capital loan?

This is easier said than done. Saving for the long term is not an automatic habit of low-income households, while borrowers as well as lenders may be cautious about taking on the increased risk of larger and longer-term loans. Financial education can address the former, and technical backstopping for farm and enterprise development may address the latter.

 

This post was contributed by Ron Bevacqua, ACCESS Advisory Managing Director. 

WORM’S EYE VIEW: THE YUNUS PERSPECTIVE

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In an emerging economy like Myanmar, how can development be hastened and reduce, if not totally eradicate poverty? Prof. Mohammad Yunus, Nobel laureate and founder of Grameen Bank shared his experience in a forum in Yangon organized by actionaid, an international NGO, the National Economic and Social Advisory Council (NESAC) and the Union of Myanmar Federation of Chamber of Commerce and Industry (UMFCCI). He emphasized financial inclusion and entrepreneurship as among the most important elements in developing small and medium enterprises (SME) in the country. The gist of his talk:

It was not a pleasant experience to witness people dying of hunger. Coming back from the US to teach at the Chittagong University, seeing widespread poverty in his country was life-changing. He asked himself how he can be of help to improve the lives of people. His reflections made him to conclude that most of the things you learn in the classrooms clashes with reality.

As we get educated, we “fly” higher and observe the world from a distance. We call this the bird’s eye view, where we see wide and thought we have seen everything. We see a lot but not much and lead us to do sweeping generalizations which made the problem harder to address. This perspective detach us you from reality.

At the ground level, it is different. As we go to the communities, we set eyes on individual persons. We know them and feel their sufferings and see their struggles. This is what we call the worm’s eye view. This is more powerful because we catch a glimpse of tiny little bits of the problem. Tiny in the sense that it refers to individual persons. We see the life of an individual which is easier to address because it is only one.

The worm’s eye view allowed him to view things in a different perspective. He saw loan sharks controlling the lives of the people, a cruel system draining the energy of the poor. He was happy to lend them himself until it grew to where it has to be done in a more organized manner. The worm’s eye view allowed him to develop a methodology different from those with bird’s eye view perspectives.

The approaches developed were considered unconventional.
• They loaned money to people without money, when traditional banks lend only to people with properties and money to pay back;
• They loaned without collateral, when loans must be secured;
• They brought banking services to the doorsteps of the clients, when standard bank services require clients to go to bank premises to be served;
• The clients owned the bank, when commercial banks are reserved only for those who have money.
These approaches developed the Grameen Bank in Bangladesh which now served 8.4 million borrowers, 97% of whom are women lending more than US$8 billion. It has turned the banking service upside down and became the model of microfinance in many countries.

After building the institution that provides financial services, building up enterprises that provides employment is the next agenda. Entrepreneurship is inherent in all of us especially the poor. However, entrepreneurial spirit is pushed down inside of the person and comes out after the person is inspired to do so. This happens when the system around us does not encourage entrepreneurial spirit to thrive and flourish.

Grameen Bank has involved in social businesses that have also promoted entrepreneurship among its members. Some of these are:

• Technology. In partnership with Telenor, Grameen Phone was launched where the village telephone lady provided service for everyone who wanted to call. It has since then become the biggest phone company in Bangladesh;

• Health services. Ultrasound and consultation through tablets to reduce death during pregnancies. Now an app for ECG to be installed in the cell phone is being considered.

• Energy. Distribution of solar home systems. Since 18 years ago, now the company sold 1.5 solar home systems.

• Food. To address malnutrition, we partnered with a company to produce yoghurt with vitamins and minerals.

Other ideas are being considered the Social Business Fund is being set up. In the universities, students were now taught to have options – to make profits or to make people happy by doing social businesses that help improve living conditions. This is the continuing effort that each one should pursue.

From the experience of Prof. Yunus and Grameen Bank, it is imperative that financial infrastructure should be developed first. Facilitating access to financial services will empower the poor as they will generate income and consume products and services that will increase demand. It is in this context that the further strengthening of microfinance institutions and other community-based organizations like cooperatives and self-help groups should be prioritized.

Notes on the QSEM

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The Qualitative Social and Economic Monitoring (QSEM) is a study conducted annually by Livelihoods and Food Security Trust Fund (LIFT), a multi-donor platform, to look at the changes resulting from the development interventions in various parts of Myanmar. The Round 4 of the QSEM conducted from March to May 2014 involving 1,474 respondents was recently released by LIFT and World Bank, highlighting the trends and transformation happening in the rural areas of the country. It covered 54 villages from the following states where LIFT has concentration of projects: Ayeyawardy, Chin, Magway, Mandalay, Rakhine and Shan.

Round 4 results have shown positive developments in the rural areas. The main findings were summarized as follows:

1. Villagers experienced better returns on their livelihoods than in previous years, though underlying structural constraints persisted;
2. Non-farm diversification and migration increased;
3. Certain poorer households were not able to benefit equally from such positive trends; there were risks of inequality; and,
4. There were small but important shifts in how people interacted with local government officials.

The results are important in a way that showed the effectiveness of the development efforts in Myanmar and the receptiveness of the people in the development efforts. Among the other noteworthy issues raised in the Round 4 report and discussed during the presentation last February 5, 2015 included the following:

1. Labor migration is increasing. As development is felt in key cities, people from the rural areas are moving to the cities particularly Yangon and Mandalay looking for more opportunities. Migration outside the country is also observed. Because of this, labor for agricultural production may be affected in the future although it is not yet felt at present. It was also observed in some areas that during peak seasons like planting and harvesting, there are no enough farm laborers to hire. Inversely, during non-peak season, there is no work for labourers, pushing them to find work in the cities.

2. Diversification of income source. The increasing number of non-farm activities rural people to move away from agricultural production. This may be an issue for food security if people stay away from agricultural production activities.

3. Increasing influence of village tract leaders. This is an additional layer in the bureaucracy. We not only deal with village heads and township officials but also with the village tract leaders. This may also be an opportunity in area where the village heads are uncooperative, with the village tract leaders may be an alternative source of support.

4. Social capital and institutional development. Most of the people’s organizations were formed for mobilization. There is a need now to transition these organizations to do economic activities and provide them with capacities and skills in managing not only organizations but enterprises as well.

5. Connectivity is promoted by cellphones. The use of cell phones for development initiatives has yet to be maximized. With apps for mobile money, market information and other updates, the community can benefit much from utilizing it as a tool for development work.

Myanmar Microfinance Updates

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The Microfinance Working Group is an informal network of microfinance institutions in Myanmar who regularly meet every two months to share updates and discuss issues affecting the industry. The first meeting for 2015 was hosted by BRAC Myanmar in their Yangon office. Among the challenges discussed during the meeting are the following:

  • Most of the MFIs are not yet ready for the integration of mobile money in their operations. As Paul Luchtenberg of UNCDF stated, it is not an issue of the MFI saying yes or no, but a matter of when. As the telecom companies and the Myanmar Central Bank is working on the regulatory framework, the banking and MFI sectors seemed still not ready for it.
  • Access to funding is still a concern for most of the MFIs. A regulation was issued in the latter part of 2014, covering the subject of accessing funding local institutions accessing international funds and international institutions accessing local funds. Two MFIs applied to check on the process.
  • Limited available local staff with skills. The manpower pool is limited, which lead to the hiring of staff from outside the country, more particularly for supervisory positions. MFIs who wanted to expand faster has to work on how to have more experienced staff to field in newly opened areas.
  • Alien staff mobility. Related to the hiring of staff is the issue of permission to move around the area of operations. Alien staff has to work on its permission to stay and the permission to go around the village, the quarter, the village tract and the township. Dealing with the different local authorities have become tedious and repetitive to some and has become a major work in terms of doing paperwork and meeting with local authorities.
  • Communication within the industry has become a problem as it was observed that Yangon-based institutions get updates from government agencies while those based outside of Yangon were sometimes not updated. The Working Group is looked upon to be the communication hub, but its informal nature does not allow it to maintain a secretariat. Microfinance Association, the supposed industry organization has not been active in the area of coordination.

Participants to the meeting are still comfortable meeting regularly since the Working Group provides the much needed industry updates. Among the latest updates are as follows:

  • There are now more than 250 registered MFIs, with a number still waiting for their licenses;
  • The cap on loan amount is now equivalent to $5,000;
  • LIFT is supporting the conduct of an impact assessment of the microfinance industry.