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.


Notes on the QSEM

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.

Solar Home System: A strategic investment for Cambodian households


In an article published in Cambodia Business Review (Issue 9, September 2013) titled Cambodia needs $1Billion to expand Electricity Supply, the energy situation in Cambodia was clearly explained.  Currently, the country is not generating enough power and has to source 45% of its energy needs from Laos, Thailand and Vietnam.  As a result, the price of electricity in the country stands at $0.15 – $1.00 per kilowatt-hour (kWh) and is considered one of the highest in Asia.  The country also has low electrification rate as only 26% of the households are connected to the power grid. In the rural areas, most of the people are using car batteries for light and small appliances.

As the article has stated, it needs more than $1B dollars to expand its electricity supply until 2030. The government has adopted the Rural and Renewable Energy Policy as part of the overall energy sector plan which calls for the tapping of all sources from crude oil generators   to hydroelectric dams and even coal plants. It has attracted investments from China, Korea and investors from other Asian countries. Despite massive investments, electrification of the whole country cannot be assured. The economic growth experienced by the country is expected to continue and will require a sizable amount of power. The power generated from the new dams and coal plants will therefore be focused first on the needs of the industries fueling the economic growth than for the household needs. Moreover, the environmental impact of the dams and the coal plants can affect the communities where these projects will be located.

The just concluded CamEnergy13 exhibit in Phnom Penh on September 10-12 was a timely activity. It showcased mainstream energy sources and alternative sources like biogas and solar.  The solar energy exhibitors featured solar energy products for industrial, home and even personal use: solar panels that can support factories, run a water-pumping station for irrigation; solar home systems that can power lights and household appliances; and even small panels that can charge cell phones.  The reality that the power grid cannot cover remote parts of the country can be answered by the availability of solar energy equipment that can provide more efficient and clean energy.

It is in this context that the program Cambodian SUN also becomes relevant. Integrating together institutions that will provide marketing support, technical service and financial service into one program assures seamless operation for the benefit of the clients.  Where previously clients are at the mercy of fly-by-night solar panel sellers, Cambodian SUN offers a full and customer-oriented service: high quality solar home system components, 24-hour call center, and regular visits of technicians and continuing education on renewable energy and other add-on benefits.  The program is spearheaded by PFTAS as the marketing arm, Kamworks as the technical service provider, and microfinance institutions as financial service providers. The latest participant to the program is the Vision Fund (Cambodia) who signed the agreement this month. Several other MFIs are invited to participate in the program to make solar home systems available to their clients as part of their social performance activities.

Cashflow lending: Towards more appropriate micro-enterprise loan products

There are two basic microfinance loan products – group loan and individual loan. Group loan scheme is used for very poor clients for them to have a support group, which also functions as the pressure group for defaulters, and to develop financial discipline necessary for a sustained financial access.  Individual loan scheme most often is provided for the “entrepreneurial poor” who has the capacity to venture into income-generating activities which we can call “livelihood activities”. These are simple buy-and-sell activities where the clients buy in bulk, place a mark-up and sell the products in the neighborhood or in areas with high foot traffic. Most of these activities are done by individuals and sometimes assisted by other members of the family including children.

 At certain point, some of the more enterprising among the clients move up and increase their volume of trading. Some enterprises evolve from livelihood to “micro-enterprises” – economic activities that exhibit growth potentials, that when given the right inputs and resources can become big. To sustain the growth, entrepreneurs have to transform themselves from a jack-of-all-trades to  managers with knowledge and  skills in inventory control, marketing, finance, and the other requisites of an enterprise. As the operation goes more complex, profit also increases that further motivates the entrepreneur to go on further.  Seizing the opportunity is the name of the game as the entrepreneur takes advantage of bulk sales, consignment from suppliers, and other marketing arrangement and balancing these with fast turnover of goods through credit sales, promotions and other schemes that ensures sales.

 At this point, one of the most important factors is cashflow.  Start-up and growing enterprises need cash to cover inventories, operating expenses to pay suppliers, workers and lenders.  The entrepreneur may need big amount at one time, but he can also have big cash inflows in another time which allows him to immediately pay back his loans. Effective cashflow management is one of the marks of an entrepreneur, and to have it, the entrepreneur need a standby source of cash, or credit that he can access every time there are cashflow concerns.

This is where the mismatch happens. Most of the loan products of MFIs are inflexible and still in the context of developing financial discipline as if  entrepreneurs are first-time borrowers. Despite the track record developed by entrepreneurs who are long-time clients of MFIs, they still has to contend with the standard loan features such as fixed amount, payments are in equal installments and made at regular intervals. The worst feature is at certain amount, hard collateral is required, limiting the amount that can be availed by the entrepreneur. The option for the entrepreneur is to borrow small amounts from different lenders to cover for his total cashflow requirement. This I think is a missed opportunity for MFIs.   With minimal skills in assessing enterprises, credit staffs are limited to determining the value of the collateral as the basis for the loan amount.  The danger of falling into the collateral lending trap was emphasized in the previous article.

 A more appropriate loan product would be cashflow-based with the following main features:

  •  credit-line type of loan with a maximum amount based on the historical data of cash requirement;
  • risk covering  is not  limited to hard collateral but a combination of  real estate, chattel, inventory and even collateral substitutes like savings;
  • fast processing of  draw down from the  approved amount;
  • business development services to enhance the skills of the entrepreneur are a must. 

Providing appropriate loan product should also be coupled with business development services to develop the soft skills of the entrepreneur. These skills will enable the entrepreneur to transform the economic activity from a livelihood to growing micro-enterprise and minimize risks as well.

The main skills that should be developed include but are not limited to the following:

  •  Basic management skills which covers how enterprises are systematically run. This involves skills in planning both for the short and long term; organizing different functions and delegating them to hired workers; and coordinating the overall operations.
  • Marketing skills which covers understanding the needs of the clients and aligning the products, doing market research, price setting and promotion.
  • Financial management and accounting to ensure that the funds of the enterprise are separated from the personal funds of the entrepreneur. Record keeping to develop track record for the formal financial institutions specifically for MFIs.

 In the end the assistance is an investment that will be mutually beneficial to both the MFI and the micro-enterprise client.

Moonlight: Lantern powered by the Sun


As the light of the moon is a reflection from the sun, so is the power of the MoonLight lantern coming from the heat of the sun.  Moonlight is one of the practical and multi-functional solar-powered tools developed by Kamworks.    It can be used as a lantern when farmers go out to their farms early in the morning; it can be fixed in the house as a lamp to provide light at night; and it can even charge cell phones!

Moonlight is a good alternative for kerosene lamp in the rural areas or a battery flashlight that needs new batteries often. It is lightweight, safe and can be carried by children without fear of electric shock, smoke or fire.  It is also convenient since one day exposure of its small panel will provide power that will last for a maximum of 6 hours.

The lifespan of the Moonlight is 5 years and it carries a warranty of 6 months. If it is broken, it has spare parts in Cambodia and repairs are done in the assembly plant of Kamworks in Kandal province. The assembly plant employs young Cambodian technicians as well.

The Cambodian SUN program offers Moonlight as one of its products.    The program is also supporting the development of new solar-powered tools and products and the enhancement of existing products to help in improving the living condition of people in areas where access to electricity is limited.  It is hoped that people even in areas covered by the electric grid will use products like Moonlight and gradually shift to more renewable sources of energy.

Addressing the bane to solar energy promotion


More than thirty people huddled under the house of the village chief to listen to the presentation of the Cambodian SUN marketing staff. Using a flipchart, they discussed the technical aspects of the product and after sales support to the solar home system (SHS). It was fast, within fifteen minutes and the presentation was finished. Question-and-answer portion followed and excited voices asked questions at the same time. The marketing staff patiently answered each question to satisfy the curiosity of the audience.

Surprisingly, the price was not the main concern, but the “cowboys”.  The term refers to the agents selling solar panels house-to-house in the rural areas of Cambodia. They sell solar home systems cheap, as they do not concern with quality of the products. The main approach is “let the buyers beware”.  No after sales service is given. Some promise to provide but when the units break down, nobody comes or the telephone number cannot be accessed.

It is no wonder that most of the questions raised were about customer service.  A specific case shared was the case of a neighbor who bought a unit and after 2 years broke down. Nobody came to repair, and the panel on the roof is a clear testament of an unfulfilled warranty. Another case is a donated set to the school. After several months, the unit was broken and nobody came to repair or maintain it.  Again, the set of three solar panels at the roof of the school reminds the people that it cannot be maintained, and investment to the SHS will be a waste of money. Business practices like these do not contribute in making solar home systems as alternative energy sources in the rural areas. It also deprives the people, especially the poor of cheap, quality and long-term energy source.

One of the main emphases of the Cambodian SUN program is to address the negative effects of cowboy sales.  With the tripartite partnership, the supplier ensures the quality of the product and the after sales customer service; the microfinance institution does not only provide loans but monitoring as well; and, the marketing firm ensures continuous information and education activities to the clients.  It is a good sight to behold that at the end of the marketing session, several people signed up for installation. They will be assessed by the microfinance institution if they are qualified. Once ascertained of their capacity to pay, units will be installed in their houses.

One unexpected result as we leave the village is a cash sale.  While the marketing staffs were answering questions, a lady phoned her children to inform them that she will be buying a solar home system unit. And she paid in cash!



The rolling hills looked like a manicured green in a golf course. As we came nearer, terraced slopes revealed the rows of tea shrubs. The village is 85 kilometers from Hanoi, and can be reached in a two-hour leisurely car ride.  Despite the short distance from the main market, farmers in the area earn less from their products for the simple reason that they sell immediately during harvest.

Consider the price of freshly harvested tea leaves at VND 800,000 ($40.00) per ton.   Consolidators buy  the leaves on the day of harvest and send it to tea processing centers which is less than an hour travel from the village. The price may even be lower during the harvest season months of June to August.

Some farmers do have equipment to dry the leaves. The processing has an average recovery rate of 20%, transforming one ton of fresh leaves to 200 kilos of processed tea leaves. A kilo of processed leaves is sold at VND80, 000 ($4.00) giving a value of VND16million ($800.00) for the processed tea leaves.

There is a big difference between the price of the freshly harvested and processed tea leaves, but for the farmers, the concept is simple – they have cash after the harvest is taken from them. Processing will mean additional labor and cost, and they will have to look for buyers of processed tea.

There is still a third stage in the value chain.   Branded tea products are sold at an average of VND200, 000. ($10.00) per kilo. So if additional efforts will be done in further processing, quality control, packaging and branding, the 200-kilo harvest can roughly amount to $2,000 in the market.

This is rough computation shows how productivity of the farmers can be enhanced.  It does not mean pushing the farmers to do marketing which is not their line of work. Let the farmers do farming, but efforts can also be done to consolidate the resources of the farmers for them to be able to “hire” professionals who can do the marketing or even the product development for them.