- Click here to download the complete MAP Myanmar diagnostic report (PDF, 3.76MB)
- Click here to download the summary synthesis note for MAP Myanmar (PDF 1.78MB)
- Click here to download the MAP Myanmar Roadmap presentation (PDF, 2.05MB)
- Click here to download the qualitative research report (PDF, 4.49MB)
- Click here to download the MAP Myanmar Agricultural Finance Summary Note (PDF, 1.99MB)
The findings and recommendations were derived from a demand, supply and regulatory analysis based on the methodology developed by Cenfri as part of the global MAP initiative. The demand-side analysis draws from quantitative data provided by the Myanmar FinScope Survey 2013 and primary qualitative research. A summary note on Agriculture Finance in Myanmar was developed based on the diagnostic.
Myanmar is rapidly opening up to the world, and is modernising its financial sector to better serve its economy and people, but information on the financial sector and financial usage has been limited and a comprehensive overview of the supply, demand for and regulation of financial services did not exist prior to MAP. The presentation of the findings of MAP Myanmar provided an overview of the financial provision landscape in Myanmar (supply side), a regulatory analysis for the provision of financial services and financial inclusion, and used FinScope data to identify and describe 5 distinct target markets for financial inclusion in Myanmar (demand side).
The target markets were identified firstly based on main source of income, and secondly based on key parameters as they influence the nature of the groups’ demand for financial services (income, gender, geography, age, education levels, use of mobile phones and take-up of financial services). The 5 target markets are:
- Farmers – are adults that reported to be self-employed (farming their own land or family land) in engagements involving crop cultivation and livestock keeping. Farmers make up the largest category of economic activity and represent their own defined target market (30% of adults).
- Formal enterprises – are enterprises that are considered regulated or licensed to operate. This segment represents adults who are self-employed and own and operate their own enterprises (6% of adults).
- Informal enterprises – are enterprises that are not licensed to operate. This segment represents adults who are self-employed and own and operate their own enterprises (12% of adults).
- Formal consumer market – consists of employees who are employed in the formal private sector (private company employees) or in the public sector (government employees) (4% of adults).
- Informal consumer market – consists of adults who receive wages from the informal market (piece work or casual labourers), adults who receive a salary from informal market (salaried private individuals) and those who rely on remittances (19% of adults).
The construction of target markets allowed a unique new demand side perspective for the financial inclusion agenda and allowed for the identification of key priority areas for future extension of financial services as well as tailored supply side and regulatory recommendations that incorporates the needs of the various target markets.
Based on the overall analysis, 6 main findings emerged:
- The Myanmar population is thinly served by financial services – most people who use a regulated financial service only use one type (either credit, savings, payments or insurance).
- High level of informality throughout the economy – there is a large and sophisticated unregulated financial sector in Myanmar and consumer perceptions of the unregulated sector is largely positive.
- Capital constrained regulated retail financial sector – while foreign capital is largely restricted, there are also several constraints on domestic capital. These capital constraints severely impact the provision and usage of regulated financial products and services in Myanmar.
- Limited infrastructure constraining business models and product offerings – Although authorities and providers are moving towards building supporting infrastructure, the current limited physical and financial infrastructure in Myanmar severely impacts on the provision and usage of financial products and services.
- Constrained product offering undermines value to customers - The combined effect of market and regulatory constraints restrict the availability of products and their features. Consequently, consumers resort to using either unregulated products or regulated products that do not adequately match their financial needs.
- Current regulatory environment not enabling expansion of rural provision and discouraging delivery to urban poor
The presentation also highlighted 7 opportunities to increase access to financial services in Myanmar:
- Dramatically increase the supply and availability of electronic payments: The vast majority of all target markets in Myanmar use nothing else than cash for payments, while efficient electronic payments are required to enable transactions and savings. This requires fast-tracking the introduction of electronic MIS systems for providers as well as a National Payment System Strategy to facilitate the coordinated development of payments infrastructure.
- Provide low-cost savings vehicles for short term savings: Myanmar has a great need to draw whatever savings is available into the regulated sector to improve the level of financial intermediation. However, much of current savings is held outside of the regulated financial sector in the form of cash or assets. This demonstrates a need for a store of value, which can be a key driver to attract savings into regulated sector. The emerging retail payments network and agents can also be leveraged to enable convenient store of value.
- Extend the availability of account-based savings options: There is a pent up demand for regulated savings and several opportunities to expand regulated savings which include:
- Improving transaction functionality and proximity to entice savings into the regulated sector;
- Leveraging the urban opportunity for bank-based deposits;
- Modernising and strengthening the largest state owned bank (MEB) to continue its role in deposit mobilisation;
- Exploring the use of village level savings associations to extend the state owned agricultural bank’s (MADB) footprint and enable voluntary savings; and
- Leveraging mobile payments to extend banks’ interest beyond high-income savers.
- Improve quantity, terms and risk profile of agricultural input credit: Expanding the delivery of agricultural credit is a major priority for the Myanmar government and can impact on as many as 19 million adults (almost half the population). Expanding access to credit for farmers requires leveraging the state owned agricultural bank’s already significant provision to farmers. However, extending their coverage will require modernisation, increased funding from the major state owned bank (MEB), an adjustment of their interest rate structure and improved product quality and features. The synthesis note also contains recommendations to leverage other credit providers for agricultural provision. These providers currently play an important, but more limited role in agricultural credit provision.
- Increase availability of unsecured credit: The limited availability of collateral in Myanmar requires unsecured financing solutions. In order to expand the provision of credit to rural and more challenging SME markets, current interest rate and loan caps should be reconsidered and stumbling blocks to raising capital should be removed in order to enable MFIs and co-operatives to move beyond urban and survivalist markets. Given the stage of development of the unsecured lending market in Myanmar, an interesting opportunity which can be explored is the provision of payroll credit.
- Grow insurance product portfolio to meet risk mitigation needs of households: The voluntary retail insurance market in Myanmar is effectively non-existent, while a large degree of risk experience is simultaneously reported. These risks are currently mostly mitigated through savings and credit, although a large proportion of those affected can do nothing to mitigate the impact. The result of alternative risk mitigation tools or the inability to mitigate results is reducing the welfare of households. There is thus a significant opportunity for the development of retail insurance, with options to develop the low-income insurance market including the enabling and development of health and funeral (life) insurance, Removing regulatory constraints on new entrants to enable innovation, enabling and leveraging existing and emerging aggregators, and creating a pathway for the formalisation of unregulated insurance offered by MFIs and co-operatives.
- Develop insurance products to provide security for credit extension and protection for consumers, particularly for agriculture: Credit-linked insurance like credit life insurance or agricultural production insurance is not currently allowed in Myanmar, but can facilitate the expansion of credit extension and protect borrowers. These two product categories are particularly relevant to Myanmar given the risks faced by the identified target groups. Enabling the provision of these two product categories can therefore have a significant impact on welfare, and several options for delivery is covered in our analysis.