Cooperative Formation and Savings Mobilization in Myanmar

Cooperative officers processing loan applications in Pathein

Member-based organizations like cooperatives are gradually growing in Myanmar. In 2017, two cooperatives in Kayin State were formed as a result of a project funded by the European Union (EU). This initiative was followed by a project funded by the US Agency for International Development (USAID) in another township of Kayin State.

The cooperative formation initiatives are meant at providing a model for the development of more sustainable cooperatives in the rural areas. Currently, the government is following its approach of ‘one-village-one-cooperative’ in cooperative formation. This approach is effective as a conduit of government funds, but it is not sustainable because of the small size which averages between 30-50 members.

ACCESS Advisory with its work in Kayin proposed a bigger cooperative at the township level or a cluster of villages to mobilize between 500-2,000 members. This will allow the mobilization and pooling of resources enough to generate resources that will support operations including the salary of full time staff. The cooperative formation model follows a three-stage process of savings group formation, consolidation and formation of cooperative. The whole process takes one year, including the period needed for the registration with the Department of Cooperatives.

A member receiving loan from the cooperative

This model was use also by the New Humanity, an Italian NGO who partnered with the Karunas Mission Social Solidarity (KMSS), with the vision of forming cooperatives in all dioceses of the Catholic Church in Myanmar. NH pilot-tested the model in the dioceses of Mandalay, Yangon and Pathein.

The main advocacy issue is for the government to support the development of cooperatives as vehicles for rural development. Cooperatives should be viewed as an empowering institution in the communities especially the remote and inaccessible areas.


Playing the China Card


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The foreclosure of the Hambantota Port in Sri Lanka is a grim reminder of what is the real score in China’s Bridge and Road Initiative (BRI). The country lost control over one of the most important ports to the Chinese after it failed to pay its amortization.  Loans from the Chinese were projected as an alternative to those coming from western-dominated multi-lateral financial institutions like the World Bank (WB) and the Asian Development Bank (ADB). Countries with financing needs who cannot qualify with these traditional financial institutions were enticed to the lenient requirements of the Chinese funds.

However, the other end of the line is filled with one-sided provisions favoring the Chinese lender. High interest rate, use of Chinese instead of local workers, in some cases question in the quality of work and as Sri Lanka experienced, as steep price for defaults.  The loans now look more like a Trojan horse rather than a development tool that will help boost the economy of the recipient country.

Some countries are having second thoughts on the proposed projects to be financed with Chinese funds. In South Asia where China has developed a pool of friendly countries, Pakistan has shelved the $14 billion Diamer-Bhasha Dam, and Nepal following the footsteps of its neighbor also shelved the $2.5 billion Budhi Gandaki Dam. In Southeast Asia, Thailand has renegotiated the $5.2 billion high-speed train system between Bangkok and Nakhon Ratchasima due to provisions considered disadvantageous to the country. The Philippines despite the closeness of the current administration has not finalized any project to be financed by China.

China may be the global leader in production, but it has to prove itself as good financial service provider and diplomat.  Chinese financing and its development programs outside China is now suspect. Politically-isolated countries like North Korea and those kowtowing to Chinese interest like Cambodia finds the funds palatable.

Myanmar was able to veer away from the Chinese influence of its patron as it realigned itself to the global economy after decades of isolation and sanctions. It was able to work out the lifting of sanctions and has attracted foreign direct investments to the country. However, the recent crisis in Rakhine pointed out the fragile partnership between Myanmar and the West.  When hundreds of thousands fled to Bangladesh and reports of death, rape and torture surfaced in the global media, the response of the West was swift. It has withdrawn support to some programs, took back awards given to State Counsellor Daw Aung San Suu Kyi and threaten to impose again sanctions.

Western countries have very low tolerance with the government and has not considered the internal dynamics between the civilian government and the Tatmadaw. The European Chamber of Commerce expressed that some companies were in a wait-and-see attitude in its engagement with Myanmar. This posturing has dented the image of the State Counsellor in the West as an icon of democracy, but in the domestic audience, a substantial part of the population silently approved of what happened.

Feeling the heat, the government sought refuge in the arms of its former patron. The trip of the State Counsellor in China is a subtle message that the country cannot be threatened as it has survived decades of sanction with China’s help. Is Myanmar now moving back to the old order? With more punitive actions from the West, it is a possibility. For now, certain balance has to be attained and appropriate approaches be employed to give the government a leeway to respond to the consequences of the events that led to the crisis, and for the international community to be conscious of the dynamics among the political players in Myanmar.


10 things to look forward in 2018


The year 2017 was annus horribilis for Myanmar with the ripple effect of the Rakhine crisis affecting the economy of the country.  Some institutions who granted awards to Daw Aung San Suu Kyi for her efforts in promoting peace and human rights withdrew the awards because of the perceived inadequate response to what happened in Rakhine. There were even efforts at re-imposing sanctions to ‘punish’ the government.   The start of 2018 will be a good time to focus on the issues that will define the rest of the year. Positive results of the recommended ten items will make this year a better time for Myanmar people and those residing in the country.

  1. More optimism and confidence in the local economy

A business survey conducted among UMFCCI members showed a decrease in investors’ confidence in the country.  The dip in the business confidence   were attributed to various factors, with government policies and the Rakhine crisis among the top issues.  With a clear manifestation from the business sector, the government should take a second look at how the issues expressed can be addressed, and respond to them as fast as possible.  Policy-making and promulgation of the needed laws should be prioritized to convince investors the government is serious in addressing their concerns. As for the Rakhine crisis, the government should continue to work with the international community in working out a solution, instead of looking at it as just an ordinary domestic problem.

  1. New telecom company will bring more benefits

Myanmar leapfrogged from analog to digital telecommunications in a short span of time. With three main players, telecom services became affordable allowing even those in the rural areas to have a hand phone. Smart phones are now a common necessary gadget, and with it potentials for online businesses.  The news of a fourth telecom company MyTel, was met with mixed responses. Many people expect the new provider will further make the market more competitive and that would  mean lower fees for services. There were also those who thought that the new player will only result to migration of clients from existing telecom companies to the new player, affecting the bottomline of existing telecom companies. Migration may actually happen if there is a perception that the services of the new player is more efficient, when in fact, it may be due to the initial small number of clients as it open its services in the country. If ever there will be decrease in the bottomline of existing telecom companies, it is hope that the services will not digress and the fees will not increase.

  1. Increased confidence in the stock market

Despite low trading volume, the stock market has consistently attracted companies to list. So far, there are now five listed companies: FMI, Thilawa SEZ, First Private Bank, Myanmar Citizen Bank and the latest company TMH Public Company. It is also noteworthy to consider that the listed companies are from various industries – banking, industry, telecom and a holding company. Opening up the market to foreign investors will not only induce more volume develop more trust to the market.

  1. Real estate to continue on its growth

The real estate sector is continuing to grow as the government focuses on urban development, high end properties and promotion of low cost housing. More laws are also providing impetus for the sector to be more vibrant. With the new Condominium Law, the sector is expected to attract more foreign investors and buyers.

  1. Improved facilities in tourism areas

Tourism is one of the main drivers of the local economy as tourist areas are spread out in various regions and states. People in tourist areas also benefit through the employment they generate and the related industries that supply the facilities in the areas.  As investments in tourist areas consistently flowed, the quantity and the quality of facilities also improved to the benefit of the tourists, resulting to the rise in the number of visitors. Another positive result is the reduction in price, where in some areas the price are closer to the level of neighboring countries like Thailand, Vietnam and Cambodia.  The quality of the facilities and the area makes tourism in Myanmar not only an enjoyable experience but a memorable one.

  1. Reliable urban transportation system

The liberalization of car importation increased the number of cars. Problems related to it also started to manifest, the buildup of traffic congestion. More cars, more idle time as traffic congestion is nearing the level of Thailand and the Philippines. Plans to have more roads and the improvement of existing ones have to be initiated to cope with the demand of the future.  Another concern is the right-hand driving with a left-hand traffic rules. For the commuters, there is a need to fix the operation of taxis – metering and ridesharing units like Uber.  Upgrading of the train system is also necessary to decongest the roads.

  1. More sustainable financing for SMEs

The missing middle becomes evident in Myanmar as banking regulations restrict access to finance of small and medium enterprises (SME).  Small livelihood types of economic activities are provided with financing from hundreds of microfinance institutions (MFI), while large enterprises are able to access from commercial banks. But the more than 90% SMEs in the country has nowhere to go. Policies on collaterals restrict the flow of funds to SMEs, making them prey to informal moneylenders who charge high interest rates. Some banks are pilot-testing guarantee programs and hope it can be mainstreamed in the near future.

  1. Kyats will stabilize in relation to the dollar

The Kyats has been down and continue to go down since the country opened up to the global market. The challenge is for the government to follow an economic program that will strengthen domestic production and focus on importing goods that will enhance the country’s production capacity. Other factors have to be addressed as well to stabilize the kyats.

  1. Reasonable wages for workers

Cheap labor is an advantage of the country, but as inflation eats up the value of the workers’ wages, the clamor for higher wages to cope with the cost of living will be heard. There will be a conflict of interest as workers fight for higher wages while employers will protect their profits and return on investments. There needs to be a balance where people can live with their wages and at the same time corporate income is assured.

  1. Poverty will be reduced

One third of the country is considered poor. As the country progresses, the people should also advance economically. No sector of the population should be left out.  As such, the benefits of development should not only trickle down to the poorest, but it should be sustainable. Government programs are in place and it is hoped that it will prevent people from falling into the pit of poverty. The business sector is also expected to share the burden through their corporate social responsibility (CSR) activities.

Originally published in Myanmar Insider, January 2018

Improving and promoting development technologies


Part of the efforts to hone the skills of technical consultants are cross-country  learning activities. Successful technologies developed in various countries are shared to other consultants to appreciate and be included in the array of tools and methodologies to be offered to clients. Among the technologies featured in the ACCESS Advisory annual planning are the following:

  1. Financial product development. Participatory process of designing loan products. This is best suited for financial institutions who would like their products to fit the needs of their clients, ensuring patronage and minimize default. Extensively used in the Philippines and Nepal.
  2. Dream to Reality Financial Literacy Course (D2R). Originally designed as a motivational tool for migrant workers and their families to manage finances, the course has now become a personal finance tool enabling people to maximize their resources to become financially independent. Migrant workers from the Philippines and Nepal working in Malaysia and South Korea benefit from this technology.
  3. Cooperative Formation. Three-stage process in forming sustainable community-based savings and credit cooperatives. It allows development institutions to phase-out in a community leaving behind an institution owned and managed by the people who can continue with their advocacies. Currently used in Myanmar.
  4. Agriculture and Livestock Financial Analysis (ALFA) Agri-Finance Tool. An Excel-based tool for credit and background check to enable financial institutions to assess the risk level of agricultural and livestock producers borrowing working capital for their production activities. Commissioned by the International Finance Corporation (IFC) for Vietnam microfinance institutions (MFIs).
  5. Value Chain Development. Identifying economic activities to be engaged in based on the results of value chain analysis (VCA) of specific commodities. Business planning for start-up activities or expansion of existing enterprises linked with the agricultural or livestock production. Extensively used in Myanmar.



The slow road to universal electrification


Recurring power failure that runs up to four hours still plague Yangon and other parts of the country. Despite the monsoon season when water is more than enough to flood hydroelectric dams, no change was felt. Deficit in power supply continue to increase and humungous generators remain relevant.

The energy problem is one of the key factors that limit the growth of the country. Growth and competitiveness cannot be maintained without addressing the power problem, especially at this time when the global economy is slowing down. With the country’s development plan hinged on exports and industrialization, special economic zones and industrial zones will not be sustained if the energy supply cannot cope with the growing demand.

No movement on since the Myitsone

The present source of power is mostly from ageing hydroelectric generators. The series of dams proposed to be constructed during the time of the military regime hit a snag with the suspension of Chinese-financed Myitsone Dam. The biggest among the proposed dams, a big chunk of the output will be consumed by its financier, and that does not sound good to the people who were uprooted to give way for its construction. Since the suspension, no major dam construction was initiated and the power deficit remains, leaving the power sector in limbo.

Blessed with big rivers crisscrossing the country, hydroelectric dams can ideally address the power needs. However, the cost of constructing a new one is staggering and it requires several years to build. China offered financing but wanted the power generated for its own use, to feed its own industries.  Myitsone remains unsettled with the Myanmar government keeping it suspended, while the Chinese government is pushing for its resumption. The Chinese are demanding for refund of the initial cost spent which runs to hundreds of millions of dollars, if the dam will be scuttled.

Dams also comes with it controversies – displaced communities, environmental degradation and corruption from all levels.  Affected people raise issues whenever plans for dam construction are proposed, and even when relocated, people take a long time to settle. In most cases, force is employed in response to people’s protest giving the state a bad image in the international community.

Tapping oil and gas

Another natural resource that can be tapped is the oil and gas industry. The Andaman Sea is rich in liquefied natural gas (LNG) that can be used as fuels.  Extracting gas from offshore deposits will not affect communities and state-of-the-art technologies minimize the environmental impact of the drilling.  The drawback is the cost, with the price of oil and gas at a low point.

The current companies in partnership with the government to extract oil and gas are PTT, Total, Daewoo and Petronas. More players are betting on the potentials of the industry in the oil and gas sector. One of the new entrants is the Canadian Foresight Group (CFG), a Singapore-registered company awarded with the M15 block at the Andaman Sea in 2014. Initial tests showed the presence of a large gas deposit.  The company is completing its tests and studies and projecting they can start production soon.   Ms. Perla Woo, Vice President of the CFG, expressed, “The volume of gas in the offshore block awarded to us is huge. Once extracted, our production will contribute to the efforts at addressing the energy needs of the country.”

Alternative energy sources in the market

Some alternative power sources are now available in the market although most still requires high investment. Solar energy is now produced in commercial quantity with the price of panels continuing to go down. Thailand and the Philippines are among the ASEAN countries with developed commercial solar producers selling to their respective national grids.

A Thai company is currently pilot testing a solar farm in Myanmar. World Bank is also supporting an electrification project to distribute solar power systems in remote areas far from the national grid. These initiatives contribute to a more affordable power source especially for those in the remote areas.

Wind is another energy source that can be tapped and developed.  The technology may not be available in the country at present but it can be considered as part of the energy portfolio of the country. In the Philippines, wind farms are commercially operating giving motivation to private investors to develop more.

Other renewable energy sources like bio gas, rice husk and garbage can also be considered even at a smaller scale.  But it seems talks of diversifying the energy source is still just that – talks. Investors are not gung-ho in filling up the demand because there is not much incentive for them to plunk their money to the energy sector.

Going for the cheaper option

The government expressed a different perspective. Daw Mi Mi Khaing from the Department of Electric Power Planning stated that the government is considering clean coal as an option for the government to pursue. Coal-powered plants can be set up easily and the price of coal in the market is quite low, a factor highly considered by the government.

The price of coal may be low compared to other fuels available in the market, but coal is not environment friendly. Coal-powered generators spew toxic fumes that pollute communities around it.  Just like the problem with dams, operations of coal-powered generators will breed resentment from the people as it will affect not only their livelihood but their health as well.

In the end the cheaper alternative may become more costly when social and health impacts become evident, and the government will have to spend again to address these problems. It will take more time, money and effort to reverse the negative effects of pollution than to prevent it in the first place.

Deciding and acting fast

The government should thoroughly weigh the options it will pursue, and it has to act fast. Power is needed to sustain the economic development of the country. The country has to think of the fastest and most appropriate response it can provide.  While deciding on the quick fix, parallel efforts should be made to consider other renewable energy sources and start investing in them.  Current initiatives should be expanded with participation of   communities that will use them.

A good mix of sources should be assembled to provide affordable prices and ensure profitability and competitiveness for industries particularly the small and medium enterprises.  It should also be affordable to ordinary people.

Funds may be the main reason why the government seemed to be slow in addressing the power conundrum. To achieve universal electrification, the government needs a lot of money. With a present debt burden of $22.7 billion, the government will be hard up to pursue  setting up new and upgrading  current power sources from its own funds. Additional borrowings will entail balancing the provision of power to keep the economic growing and servicing the debt burden.

Private investment can be invited to pour their money into the sector. Luring investors however will require tax privileges and other incentives for them to come to the country. Tax privileges limit the country’s ability to collect income from a profitable industry.

The government remains in a bind to design a framework to entice investments to the power sector. The dream it to have the ideal price of electricity necessary to create the environment to encourage economic activities to flourish and contribute to the country’s sustained growth.




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


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.