75168 IFC Advisory Services in East Asia and the Pacific Microfinance in Myanmar Sector Assessment By Eric Duflos, Paul Luchtenburg, Li Ren, and Li Yan Chen January 2013 IFC Advisory Services in East Asia and the Pacific Microfinance in Myanmar Sector Assessment By Eric Duflos, Paul Luchtenburg, Li Ren, and Li Yan Chen January 2013 About IFC IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments. In FY12, our investments reached an all-time high of more than $20 billion, leveraging the power of the private sector to create jobs, spark innovation, and tackle the world’s most pressing development challenges. For more information, visit www.ifc.org. About CGAP CGAP is an independent policy and research center dedicated to advancing financial access for the world’s poor. It is supported by over 30 development agencies and private foundations who share a common mission to improve the lives of poor people. Housed at the World Bank, CGAP provides market intelligence, promotes standards, develops innovative solutions, and offers advisory services to governments, microfinance providers, donors, and investors. For more information, visit www.cgap.org Disclaimer IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. The conclusions and judgments contained in this report should not be attributed to, and do not necessarily represent the views of, IFC or its Board of Directors or the World Bank or its Executive Directors, or the countries they represent. IFC and the World Bank do not guarantee the accuracy of the data in this publication and accept no responsibility for any consequences of their use. TABLE OF CONTENTS Acronyms................................................................................................................. ii Acknowledgments................................................................................................. iii Executive Summary............................................................................................... iv I. Country Context. .................................................................................................1 A. Population..............................................................................................................2 B. Economy.................................................................................................................3 C. Financial Sector Overview........................................................................................4 II. Micro Level: Demand and Supply of Microfinance. .......................................7 A. Demand for Microfinance........................................................................................8 B. Supply of Microfinance............................................................................................8 III. Macro level: The Policy, Regulatory and Supervisory Framework. .......... 13 A. Policy Environment................................................................................................14 B. Regulatory Environment. ........................................................................................14 C. Supervisory Capacity.............................................................................................16 IV. Meso Level: Financial Infrastructure, Networks, and Training.................. 19 A. Financial Infrastructure..........................................................................................20 B. Networks and Training Institutions.........................................................................21 C. Research...............................................................................................................21 V. Funding............................................................................................................. 23 VI. Recommendations. ........................................................................................ 25 A. Policy, Regulatory, and Supervisory Framework.......................................................26 Demand and Supply of Microfinance......................................................................27 B. C. Market and Financial Infrastructure........................................................................28 D. Funder Effectiveness..............................................................................................29 Annex .................................................................................................................... 31 A. Summary of Opportunities and Challenges in the Market.......................................32 B. Profile of Key Microfinance Operators. ....................................................................33 C. Areas for Future Research at the Policy Level..........................................................38 D. List of Meetings....................................................................................................39 E. Research Background............................................................................................40 F. Bibliography...........................................................................................................41 i ACRONYMS AFD Agence Française de Developpement AMDA Association of Medical Doctors of Asia AML/CFT Anti-Money Laundering and Combating the Financing of Terrorism ASEAN Association of Southeast Asian Nations CARD Center for Agriculture and Rural Development CGAP Consultative Group to Assist the Poor DFI Development Finance Institution EAP East Asia and Pacific EU European Union FI Financial Institution FIND Financial Inclusion for National Development FMO Financierings-Maatschappij voor Ontwikkelingslanden GDP Gross Domestic Product HR Human Resources IDA International Development Association IFC International Finance Corporation IFI International Finance Institutions IMF International Monetary Fund KfW Kreditanstalt Fur Wiederaufbau LIFT Livelihoods and Food Security Trust Fund MADB Myanmar Agricultural Development Bank MAP Making Access Possible MFI Microfinance Institution MIDB Myanmar Small & Medium Industrial Development Bank MIS Management Information System MISFA Microfinance Investment Support Facility for Afghanistan MNO Mobile Network Operators MSE Microfinance Supervisory Enterprise NGO Nongovernment Organization OSS Operating Self-Sufficiency PACT Partner Agencies Collaborating Together SWIFT Society for Worldwide Interbank Financial Telecommunication UNCDF United Nations Capital Development Fund UNDP United Nations Development Program UNOPS United Nations Office for Project Services WB World Bank Kyat/US$ exchange rate: 100 Kyats = 0.12 US ii ACKNOWLEDGEMENT This report was written by Eric Duflos, Paul Luchtenburg, Li Ren, and Li Yan Chen. The authors would like to thank those who have reviewed the report and provided invaluable comments: Rachel Freeman (IFC), Simon Andrews (IFC), Sanda Liepina (IFC), Charles Schneider (IFC), Hannfried von Hindenburg (IFC), Steve Rasmussen (CGAP), James Seward and Nataliya Mylenko (World Bank), Myint Kyaw, Barclay O’Brien, Andrew Kirwood (LIFT), Thein Myint (UNDP), Neal Youngquist (World Vision) and Fahmid Bhuiya (Pact). We would also like to thank Patrick Carpenter (IFC), Anna Nunan (CGAP) for editing this report, Kai Bucher (CGAP) for his review, and Kunthea Kea (IFC) for the layout. We are also thankful to the people and organizations who have contributed to this study through interviews before, during, and after our mission; they are listed in the annexes of this report. Photo Credits Eric Duflos Paul Luchtenburg Cover (right) Cover (left) Page 1 Page 33 Page 7 Page 15 Page 21 Page 25 Page 27 iii EXECUTIVE SUMMARY Myanmar’s re-entry onto the global stage provides a The demand for microfinance1 is high. However, unique opportunity for IFC and the World Bank to few institutions provide microcredit, and unmet engage in interventions that support development demand is estimated by industry experts at close to of Myanmar’s nascent private sector. In June US$ 1 billion (UNCDF 2012). Demand for formal 2012, IFC and CGAP representatives conducted a savings is difficult to estimate and may depend on financial sector scoping review to assess Myanmar’s regions. Past crises in the banking and cooperative financial inclusion landscape and explore potential sectors have eroded public trust in formal savings investment and advisory interventions. This report products. Use of informal providers of credit and presents the team’s key findings and preliminary transfer services in both urban and rural areas is recommendations. It aims at providing more public widespread despite the additional risks and expense information, and helping define strategies to support (10–20 percent per month) (LIFT 2012).2 Two clear the sector going forward. Additionally, it aims at priority markets are rural finance, with 54 percent informing a joint and complementary approach of the population involved in agriculture, and amongst the donors and Development Finance international remittances, with over three million Institutions to develop the sector. people from Myanmar working abroad (Ministry of Labour 2012). Myanmar is one of the poorest countries in Southeast Asia, with a per capita income of approximately The authors estimate that current microfinance US$832 in 2011 (IMF 2012a). Its economy outreach is 2.8 million microclients. The supply side suffers from unstable inflation, a rigid interest rate comprises a variety of formal and informal actors. regime, and a distorted exchange rate. Recently, State-owned banks, such as Myanmar Economic the government embarked on a series of reforms Bank (MEB) and Myanmar Agriculture Development to improve the business and investment climate, Bank (MADB), have a large outreach. MADB reports facilitate financial sector development, and further that it provides deposit and credit to more than 1.4 liberalize trade and foreign direct investment. million people in rural areas, but on a subsidized basis. Private banks are not involved in microfinance, The financial sector in Myanmar is small and partly for regulatory reasons and partly because of a underdeveloped. It is dominated by four state- lack of interest. Cooperatives, which started in the owned banks and 19 private banks. Foreign banks early 20th century, report more than 10,000 primary currently are not allowed to operate in Myanmar, societies and 470,000 members. International and though 17 foreign banks have already established national nongovernment organizations (NGOs), local representative offices in-country. Overall, the such as Partner Agencies Collaborating Together banking sector is severely constrained in its outreach (PACT), GRET, World Vision, and Proximity, have to the unbanked, with some industry estimates and pioneered microfinance methodologies since the recent research suggesting that less than 20 percent of mid-1990s with some success. The UNDP–PACT the population has access to formal financial services project is the largest microfinance initiative; it reports (LIFT 2012). over 360,000 active borrowers and over 420,000 1 This paper uses the shorthand term “microfinance� to refer to financial services for low-income people. The financial services used by low-income people include credit, savings, transfers, and insurance. 2 According to the LIFT report, informal lending rates are usually below 20 percent, but they can go as high as 30 percent per month. iv depositors. In addition, although 60 specialized Supervisory Enterprise has been tasked to license agriculture development companies support 200,000 and supervise MFIs despite its limited experience farmers with loans each harvest season, the largest one in supervising financial institutions. It will therefore has fewer than 7,0003 clients. Informal lenders and require significant training. semi-formal village revolving funds or community- based organizations are also widespread.4 Finally, While the review focused on supply and policy several political and government organizations deliver environments, it also noted that the financial credit. Overall, suppliers have limited capacity to infrastructure is underdeveloped and lacks a expand in a sustainable way, and the transformation functioning payment system. The central bank is process of NGOs into for-profit licensed institutions actively working on this matter. There is no active could take years to develop. The market is therefore credit bureau. The supply of technical support is large enough to attract greenfield banks that could also limited, with only a few trainers available. A significantly improve outreach while contributing to microfinance working group made up of leading innovation in the sector. While it needs to be further microfinance NGOs has been established; it could researched, the scope for branchless banking seems play an important role in the dissemination of good limited due to the lack of infrastructure and the high practices and advocacy. Donors have increased their cost of SIM cards. financial support to microfinance. UNDP was the pioneer in doing so, with PACT in the mid-1990s; On the policy side, President Thein Sein’s public the Livelihoods and Food Security Trust Fund endorsement of the development of a microfinance (LIFT) organized by a group of 10 donors has also sector in May 2011 has opened the door to become a key player after the Nargis cyclone in 2008. formalizing microfinance. In November 2011, the Notable forthcoming initiatives include the World government adopted a new Microfinance Law as Bank Financial Inclusion for National Development well as Notification 277 and Instructions. This (FIND), which aims to support the regulatory and framework allows local and foreign investors to supervisory framework, and the UNCDF Making establish fully privately owned MFIs, including Access Possible (MAP) diagnostic tool, which will those existing microfinance providers operating be used to conduct an in-depth diagnostic that can “illegally� before the law was established. While a inform and influence future policies and donor more thorough analysis is required, the new legal activities. IFC is also planning a program to support framework for MFIs has several challenges that should the sector. be considered, including limited differentiation between deposit and nondeposit MFIs, low capital In summary, the microfinance sector is at the earliest requirements for deposit-taking institutions, and an stages of development in Myanmar. There are great interest rate ceiling. The low capital requirements opportunities alongside great challenges for growth. have spurred an influx of registered MFIs (118 MFI Any successful intervention will require a rapid licenses were issued between November 2011 and dissemination of international good practices and a November 2012). In addition, the Microfinance high level of donor coordination. 3 Interview with Myanmar Rice Association, June 2012. 4 Interviews with PACT and LIFT, October 2012. v I. COUNTRY CONTEXT 1 A. Population With a geographic area of 676,578 km2, Myanmar Myanmar has a favorable geographic location in is the second largest country in Southeast Asia terms of trade: it borders India and Bangladesh to in size (behind Indonesia); it has an estimated the Northwest, China to the Northeast, and Lao population of 62 million.5 More than two-thirds of PDR and Thailand to the East. The country has the population lives in rural areas, where agriculture a clear potential to be a regional trading hub. It is the main source of employment, particularly has extensive fertile land and is richly endowed around the Irrawaddy valley, which is situated with natural resources, including oil and natural between the Arakan Mountains in the West and gas, metals, wood products, and precious stones. the Shan Plateau in the East. Myanmar has one of However, decades of isolation has left the country the lowest population densities in the region, with severely underdeveloped. Myanmar is one of the an average of 90 inhabitants per square kilometer. poorest countries in Southeast Asia, with a per The country is composed of 14 states and regions, capita income of approximately $832 in 2011. It 64 districts, 324 townships, and 65,148 villages. was ranked 149 out of 187 countries in the 2011 The most densely populated areas are Yangon, UNDP Human Development Index. According to Ayeyarwady, Mandalay, and Mon State. The the UNDP-supported household surveys, overall population is ethnically diverse, with 135 distinct poverty was 26 percent in 2009, with significantly ethnic groups and 108 different ethnolinguistic higher poverty concentration in rural areas (29 groups. The total population is estimated to be 68 percent rural vs. 15 percent in urban areas) (UNDP percent Burmese, 9 percent Shan, 7 percent Karen, 2011). 4 percent Rakhine, 3 percent Chinese, 2 percent Indian, and 2 percent Mon. Figure 1: Myanmar Demographics Data Population Number of Number of Number of Population States/Regions Population per sq km Districts Townships Villages 2012 1 Mandalay Region 14% 620 7 31 5,472 8,865,858 2 Ayeyarwady Region 14% 240 6 26 11,651 8,435,786 3 Yangon Region 12% 744 4 45 2,119 7,563,377 4 Sagaing Region 10% 68 8 37 6,095 6,382,723 5 Bago Region 10% 157 4 28 6,498 6,155,173 6 Shan State 10% 38 11 54 15,513 5,952,852 7 Magway Region 9% 122 5 25 4,774 5,480,736 8 Rakhine State 6% 93 4 17 3,871 3,412,529 9 Mon State 5% 244 2 10 1,199 3,001,724 10 Kayin State 3% 61 3 7 2,092 1,848,959 11 Tanintharyl Region 3% 96 3 10 1,255 1,676,282 12 Kachin State 3% 22 3 18 2,630 1,962,748 13 Chin State 1% 16 2 9 1,355 580,451 14 Kayah State 1% 27 2 7 624 321,447 Total 64 324 65,148 61,640,645 Source: Ministry of Health 5 IMF estimate for 2011. Readers should note that data on Myanmar are limited and inconsistent, with population estimates ranging from 48 million to 62 million. The latest national census was conducted in 1983. Similar data discrepancies exist for other economic and social indicators. 2 b. ECONOMY While the economy has experienced reasonable growth reforms to improve the business and investment in recent years (real GDP growth was estimated at climate, facilitate financial sector development, and 5.3–5.5 percent in 2010–2012 by IMF), much of this further liberalize trade and foreign direct investment. was driven by buoyant commodities exports and high Actions have included adopting a managed float fiscal spending in the run-up to the 2010 elections. exchange rate regime,7 increasing the deposit-to- The overall economy continues to suffer from capital ratio from 10 to 25 times (IMF 2012b), and significant macroeconomic imbalances, including allowing agricultural land to be leased for up to 60 unstable inflation, a rigid interest rate regime, and years.8 Further reforms are underway to promote a distorted exchange rate system. Furthermore, the sustainable growth and to improve international business environment is widely viewed as opaque, competitiveness, including passage of the new corrupt, and highly inefficient. Wealth from ample Financial Institutions Law, Foreign Investment Law,9 natural resources is often concentrated in the hands and Special Economic Zone Law. Implementation of of an elite group. In 2011, Myanmar was ranked 180 these laws will be critical if Myanmar is to join the out of 183 countries in the Corruption Perceptions ASEAN integration in 2015, which aims to create a Index by Transparency International. 6 single market and production base with the free flow of goods, services, investment, capital, and labor in Under the leadership of the new president, Thein Sein, Southeast Asia member countries. the country has embarked on a series of economic Figure 2: Macroeconomic Snapshot Source: IMF – Myanmar 2011 Article IV Consultation. 6 http://cpi.transparency.org/cpi2011/results/ 7 The managed float system allows for daily fluctuations in the exchange rate of Myanmar kyat to the U.S. dollar, against the initial exchange rate of US$1 = 818 kyat set on 1 April 2012. 8 Interview with MADB, June 2012 9 The Foreign Investment Law was recently passed on 2 November 2012. 3 C. Financial Sector Overview The financial sector is small and highly first time in more than 50 years, private insurance underdeveloped. Access to financial services is companies have been given conditional approval severely limited, as reflected by the low outstanding by Myanma Insurance and the Insurance Business loans-to-GDP ratio of 4.7 percent and deposits- Supervisory Board (IBSB) to begin operations. to-GDP ratio of 12.6 percent in 2011 (Seward IBSB received 20 applications, but only 12 have 2012). Four state-owned banks and 19 private been approved (all local and no foreign), pending banks dominate the sector, which is closed to their ability to meet paid-up capital requirements foreign competition in accordance with the existing and deposit funds in Myanmar Economic Bank. Of Financial Institutions Law, which prohibits foreign the 12 companies, three plan to offer life insurance, banks from operating or engaging in any joint which requires paid-up capital of K6 billion (nearly ventures with local banks. Myanmar has, however, US$7 million). The remaining nine institutions plan committed to allow foreign banks to establish to offer life and general insurance, which requires wholly owned operations once domestic banks total capital of K46 billion or (US$53 million). have been prepared for foreign competition. Work The companies are Apex Insurance International is underway to revise outdated banking laws ahead Company, IKBZ Insurance Public Company, Great of Myanmar’s integration with ASEAN in 2015 Future International Insurance Company, Capital (McNulty 2012). In anticipation of this, 17 foreign Life Ltd Insurance Application, Global Standard banks have established local representative offices Insurance Public Company, Green Asia Insurance in the country. Company, Jade King and Queen Service Company, Mya Wady Insurance Company, Pillar of Truth There is only one state-owned insurance company in Insurance Company, Citizen Business Insurance Myanmar. It is small in scale and outreach and offers Company, Ayeyar Myanmar Insurance Company, no insurance for any form of agricultural sector and Myintmo Min Insurance Company (Myanmar activities, such as flood, crop, or livestock. For the Times 2012). Table 1: Overview of Myanmar’s Banking Sector State-Owned Banks (4) Domestic Private Banks (19) Foreign Banks with Rep Offices (17) Myanma Agriculture and Development Asia Green Development Bank AB Bank Myanma Economic Bank Asia Yangon Bank Bangkok Bank Public Company Myanma Foreign Trade Bank Ayeyarwaddy Bank Bank for Investment and Development of Myanma Investment and Commercial Bank Co-operative Bank Brunei Investment Bank (BIB) First Private Bank CIMB Bank Berhad Innwa Bank DBS Bank Kanbawza Bank First Commercial Bank, Singapore Branch Myanma Apex Bank First Overseas Bank Myanma Industrial Development Bank Industrial and Commercial Bank of China Myanma Livestock and Fisheries Development Malayan Banking Berhad (MAYBANK) Myanmar Citizens Bank Mizuho Corporate Bank Myanmar Oriental Bank National Bank Myawaddy Bank Oversea-Chinese Banking Corporation Sibin Tharyar Yay Bank Siam Commercial Bank Public Company Tun Foundation Bank Sumitomo Mitsui Banking Corporation United Amara Bank The Bank of Tokyo-Mitsubishi UFJ Yadanabon Bank United Overseas Bank Yangon City Bank Yoma Bank Source: Central Bank of Myanmar website - retrieved July 2012. 4 Expanding financial inclusion and microfinance the conservativeness of the banking sector. is closely related with the stage of development of the formal financial sector. Currently several factors • Limited provision of insurance services. inhibit financial sector growth and outreach to the As noted, there is only one state-owned unbanked populations:10 insurance company in Myanmar; it is small in scale and outreach, with no insurance for • Interest rates are set by the Central Bank. In January any form of agricultural sector activities, 2012, the Central Bank lowered the minimum such as flood, crop, or livestock insurance. deposit rate from 10 percent to 8 percent, and the maximum loan rate from 15 percent to • Banking products and services are limited. The 13 percent. This narrow spread of 5 percent sector is largely confined to fixed deposits discourages banks from reaching the lower end of and one-year fixed-rate loans. Some banks the market segment due to higher operating costs. also offer domestic remittance services, but these are limited to urban areas, with hundys • Deposits are limited to 25 times paid-up capital. (informal domestic and international transfers) While the deposit-to-capital ratio was increased serving the larger rural market. Recently, from 10 to 25 times in March 2011, it still limits private banks have been authorized to establish the ability of banks to mobilize more savings. As a international banking businesses; 11 private result, most banks do not serve rural areas, which banks are in the process of installing SWIFT represent at least two-thirds of the population. to begin international remittance operations. • Banks must maintain a liquidity rate of 20 percent. • Limited prospects to use technology to increase Only 80 percent of deposits can be lent out. access. The potential for branchless banking This shifts the focus of most banks to serve more is limited because of the monopolistic and profitable segments, such as the larger trade and underdeveloped status of the communication construction companies, and further limits credit sector. Myanmar’s mobile penetration rate is access to smaller enterprises and microclients. estimated at less than 5 percent with 3 million users, though the number of unique users could • Collateralized lending is conservative, with a 50 be as low as 1.3 million; a SIM card costs between percent loan-to-value (LTV) ratio. The Central US$160 and US$200 (Nomura Equity Research Bank has expanded the eligible list of collateral 2012). It will take time before mobile network to include land, buildings, gold, exportable operators (MNOs) can launch financial services crops, and bank deposits. The LTV of 50 percent in Myanmar, though the government has shown is a self-imposed industry standard that reflects interest in moving this forward. 10 Information based on World Bank (2012b) and interview with Central Bank (June 2012). 5 MICRO LEVEL II. DEMAND AND SUPPLY OF MICROFINANCE 7 Microfinance is widely seen as a key development there are over three million overseas workers from tool to promote financial inclusion and alleviate Myanmar working in ASEAN, as such, there is high poverty in Myanmar. While cooperatives have market potential for international remittances. It is existed in country since the early 20th century, estimated that remittances from migrant workers microfinance was first introduced to Myanmar in represent at least 5 percent of the country’s GDP 1997 by UNDP’s Human Development Initiative. (Hookway 2012). In November 2011, the government passed the new Microfinance Law, paving the way for expansion of It is estimated that the demand for microcredit is microfinance services by allowing local and foreign close to US$1 billion (UNCDF 2012). While overall investors to establish wholly privately owned MFIs demand exceeds supply, according to MADB there is in country. This law also provided a legal footing potential for over-indebtedness of farmers in some for those existing microfinance providers that had geographic areas (apparently due to several factors, been operating “illegally� before the law’s passage. such as the recent decline of the price of rice and Nevertheless, the number of promising providers beans, which are the main cultivations, and access (i.e., institutions with the potential to scale up in a to multiple loan sources, including money lenders). sustainable and responsible way) remains limited, According to LIFT (2012), 63 percent of households and the financing gap is wide. interviewed had increased their level of indebtedness in the past year. A. Demand for Microfinance While the demand for microloans and A recent survey of 4,000 households conducted by microtransfers is clearly reflected in the large LIFT found that only 16 percent of households used supply of informal services, the demand for formal financial services. According to the survey, the savings is more complex and will require further most common sources of loans were family, friends, research. Public trust in deposit services has been and moneylenders. Interestingly, poorer households eroded by a cooperative crisis in the 1980s and a borrowed mostly for food purchase and health bank run in 2003–2004. Additionally, Myanmar’s emergencies, whereas higher income households high inflation over the past decade (averaging over borrowed for input purchase and business investments 20 percent from 2000 to 2009) (IMF 2012b), has (LIFT 2012). This recent survey supports earlier prompted many to save in gold and commodities claims that a large section of the population relies instead. However, the 2011 introduction of a on informal lenders to meet its cash flow needs. new deposit insurance scheme (which covers up Most notably, while the agricultural sector represents to 500,000 kyats per depositor) and a seemingly 43 percent of GDP and employs 54 percent of the stabilized inflation rate may help make savings population, only 2.5 percent of all outstanding products more attractive (Thit 2011). According loans are made to this sector (Seward 2012). The to PACT, there is significant demand for saving Myanmar Agricultural Development Bank (MADB) services but the nature and the amplitude of the estimates that the production cost per acre of rice demand varies depending on regions.11 farmland is 100,000–150,000 kyats (US$115–170), for which the maximum loan from MADB is 50,000 B. Supply of Microfinance kyats, leaving a potential gap of at least 170 billion kyats (US$194.3 million). Additionally, a farmer can Based on the limited data available, we have estimated borrow for a maximum of 10 acres. Farmers often fill that current microfinance outreach is 2.8 million the gap by borrowing from informal money lenders microclients, with a total loan portfolio of 236 billion who often charge 10–20 percent interest per month kyats (US$283 million). See Table 2. Relative to the (LIFT 2012). Alongside the demand for loans is the enormous demand, there are few institutions that need for domestic and international money transfers, provide microfinance services that have the potential which is mostly met by using informal transfer to reach a large scale while providing their services in providers. According to the Ministry of Labour, a financially sustainable and responsible way. 11 Interview with PACT, October 2012 8 Table 2: Microfinance Microfinance Providers Providers in Myanmar in Myanmar Number of Outstanding Average Loan Number of Average Branches / Number of Loan Portfolio (in outstanding Deposit Total Savings Deposit Size Supervisory Category Individual Institutions Outlets Borrowers Kyats) (in Kyats) Accounts (in Kyats) (in Kyats) Regulated Agency MADB1 205 1,420,000 84,000,000,000 59,155 1,720,000 86,891,840,000 50,519 Yes Ministry of State Owned A i l Bank Ministry of Finance MSLE2 143 208,778 31,341,790,000 150,120 N/A N/A N/A Yes and Revenue 2 Central Bank of Private Bank MLFDB 53 N/A N/A N/A N/A N/A N/A Yes Myanmar PACT - UNDP3 105 365,410 52,701,000,000 144,224 420,133 10,930,000,000 30,000 No N/A Microfinance PACT MFI3 16 57,128 4,234,502,910 74,123 N/A N/A N/A Yes Supervisory Enterprise Microfinance GRET MFI4 4 6,155 840,041,000 136,481 Non-deposit taking MFI Yes Supervisory Enterprise Microfinance Non- Save the Children MFI5 N/A 7,737 367,747,782 47,531 7,737 25,975,513 3,357 Yes Supervisory Governmental Enterprise Organization Microfinance World Vision MFI6 12 13,282 1,910,033,328 143,806 N/A N/A N/A Yes Supervisory Enterprise Microfinance Proximity Design MFI7 8 16,000 3,113,831,000 194,614 N/A N/A N/A Yes Supervisory Enterprise AMDA8 N/A 1,510 55,109,960 36,497 N/A N/A N/A No N/A Total8 N/A 1,197 165,077,000 137,909 N/A N/A N/A No N/A Central Cooperative MSE / Central 46 32,851 1,125,690,000 34,267 32,851 340,340,000 10,360 Yes Society MFIs9 Cooperative Society Cooperatives Financial Cooperatives - Central Cooperative Union of Savings and 1625 476,632 16,500,000,000 34,618 476,632 24,200,000,000 50,773 Yes 9 Society Credit Federation Rice Specialization Specialized 10 38 57,502 20,092,708,226 349,426 N/A N/A N/A No N/A Companies Agricultural Companies Other Agri Specialized 10 22 140,000 20,000,000,000 142,857 N/A N/A N/A No N/A Companies 11 Women's Union 16 4,800 48,000,000 10,000 N/A N/A N/A No N/A Union Solidarity Development N/A N/A N/A N/A N/A N/A N/A N/A N/A 12 Association Community Based N/A N/A N/A N/A N/A N/A N/A No N/A Organizations12 TOTAL 2,293 2,808,982 236,495,531,206 119,763 2,657,353 122,388,155,513 Notes to the Table: It should be noted that overall data availability and accuracy is low, so the above figures should be read with some caution. Assumes US$1 = 875 Kyats. 1. Data as of March 2012 provided by MADB. Notes to the Table 2. Data as of March 2011 from CBM (Seward 2012) 3. Data as of September 2012 from UNDP for PACT UNDP and as of end October 2012 from PACT for PACT MFI. 4. Data as of October 2012 from GRET. 5. Data as of October from Save the Children. Savings are from members only. It should be noted that overall data availability and accuracy is low, so the above figures should be read with some caution. 6. Data from World Vision MFI, 9 November 2012 7. Data from Proximity Design, October 2012. 1. Data as of March 2012 provided by MADB. 8. Data as of end-September 2009 from ACTED and Banking with the Poor Network (2009). 9. Data as of May 2012 from CCS. Data for Microcredit Cooperatives as of September 2011. 2. Data as of March 2011 from CBM (Seward 2012) 10. Data as of September 2011 from the Myanmar Rice Association. 11.Estimates provided during interview with MADB, June 2012. 3. Data as of September 2012 from UNDP for PACT UNDP and as of end October 2012 from PACT for PACT MFI. 12.No data available. 4. Data as of October 2012 from GRET. 5. Data as of October from Save the Children. Savings are from members only. 6. Data from World Vision MFI, 9 November 2012 7. Data from Proximity Design, October 2012. 8. Data as of end-September 2009 from ACTED and Banking with the Poor Network (2009). 9. Data as of May 2012 from CCS. Data for Microcredit Cooperatives as of September 2011. 10. Data as of September 2011 from the Myanmar Rice Association. 11.Estimates provided during interview with MADB, June 2012. 12.No data available. 9 MADB has about half of the estimated microclients. The semi-formal sector comprises of pawn shops13 Generally, microfinance operators offer products and community-based organizations, such as village designed to help micro or small enterprises meet revolving funds and village savings and credit production needs or enable poor households to groups. While pawnshops are officially registered, meet primary needs. Products include income- it is not clear how they are supervised. Many generating loans, agricultural loans, consumer loans, deal only in gold, and they charge 3–5 percent in healthcare loans, education loans, client welfare interest per month (LIFT 2012). Many village- schemes, and voluntary savings. Microsavings based organizations were created by donors and remain underdeveloped due to a limited number of international NGOs. According to MADB there are suppliers and the aforementioned lack of savings 12,000 of them serving 1.4 million people (Seward culture. The rough data estimate in Table 2 indicate 2012). that approximately 2.2 million people have access to formal voluntary “microsavings,� mostly through 2. BANKS state banks, private banks, and cooperatives.12 State-Owned Banks There are six kinds of providers of microfinance services in Myanmar: State-owned banks, particularly Myanmar Economic Bank (MEB), represent the largest 1. Informal and semi-formal sector provider of deposit services in Myanmar. With 325 2. Banks branches, MEB provides access to deposit services, 3. Cooperatives primarily in urban areas (Seward 2012). While 4. NGOs it does not engage in microlending, MEB does 5. Specialized agricultural development companies provide subsidized funding to Myanmar Agriculture 6. Government organizations Development Bank (MADB), which is a specialized agricultural development bank. MADB and the 1. INFORMAL SECTOR AND SEMI- semi-private bank Myanmar Livestock and Fisheries FORMAL SECTOR Development Bank (MLFDB) provide small- scale loans to microenterprises. MADB has 1.72 A large informal sector exists and is composed of million savers and 1.4 million borrowers, primarily money lenders and hundys (informal domestic and in rural areas and the agriculture sector.14 Limited international transfers). Informal providers are information is available on MLFDB. According to expensive and can be unreliable. Money lenders are the World Bank (Seward 2012), MLFDB has 53 reported to charge 10–20 percent interest per month, branches, and 55 percent of the its loans are to the an indication of significant unmet demand for agricultural sector. microcredit (LIFT 2012). The informal remittance market and hundys are widespread throughout the Private Banks country, according to Myanmar Small & Medium Industrial Development Bank (MIDB), including Private banks have shown little interest in in rural areas, and are providing much needed microfinance because they often lack capacity and informal domestic and most often international expertise for the undertaking and because of certain remittance services. Family and friends, who charge regulatory constraints. Banks are subject to an various interest rates, are another important source interest rate band of 8 percent minimum interest of informal credit especially for the poor (LIFT on savings and 13 percent maximum interest on 2012). loans on declining balance (Seward 2012). While 12 This figure does not include the deposit accounts from the UNDP project which is not a formal institution. 13 Many pawn shops are registered by the Myanmar Small Loan Enterprise. 14 Interview with MADB, June 2012. 10 banks charge a 1 percent commitment fee and a license. It also operates 46 MFIs that function as lawyer’s fee, they can hardly expect to break even if village banks in seven states and regions. As of May they move into microfinance, given that operational 2012, CCS reported total capital of 152.65 million expenses for PACT, the leading MFI, represent kyats, total membership of 32,851, total savings of 15–18 percent of its gross loan portfolio.15 Second, 340 million kyats, and total loans outstanding of under the current Financial Institutions Law, 1.1 billion kyats. CCS appears to have a reasonable collateral, including land, buildings, agricultural governance structure in place: its General Assembly products/commodities, gold, and cash deposits, is the ultimate authority, and its Board of Directors are required to back the loans, with a maximum comprises 35 members, including five full-time loan-to-value ratio of 50 percent in most cases.16 directors. This requirement also applies when banks provide funding to other MFIs, such as cooperatives, the Financial cooperatives are organized under the Union Solidarity Development Party (USDP), or Union of Savings and Credit Federation (tertiary the women’s association—all of which are engaged level society), which, as of March 2012, had 41 in retail lending to the rural poor—and as such it savings and credit federations (secondary level is difficult for banks to fulfill the role of wholesale societies) and 1,625 primary level societies. The funder. The new Financial Institutions Law may Union does not have a microfinance license. It create a better environment for banks to downscale. lends to the primary societies at a flat 2 percent interest rate per month. It also launched its own Private banks are reported to be generating profits lending to individuals in June 2012. As a whole, the primarily from domestic remittances and lending to Union reported savings of 24.2 billion kyats and trade and construction companies.17 As such, they outstanding loans of 16.5 billion kyats, with a total serve only a small portion of the micro segment in membership of 476,632. terms of remittances, and they focus their activity on urban areas because of the inadequate infrastructure 4. NGOs of the financial sector. The Central Bank has confirmed that 11 private banks are currently Before the passage of the Microfinance Law in installing SWIFT to establish foreign banking November 2011, only PACT UNDP was allowed businesses.18 The Central Bank expects that three to operate in Myanmar legally. All others operated private banks—Kanbawza Bank, Cooperative Bank, without legal status, which essentially prevented them and Asia Green Development Bank—will be allowed from developing or scaling up their microfinance to launch inward money transfers in the coming programs. Since then, most international NGOs and months. NGOs have received or will soon receive their MFI license. The leading institutions (GRET, PACT, 3. COOPERATIVES 19 Save the Children, and World Vision) have reached over 450,000 active borrowers with an aggregate Cooperatives focus primarily on deposit mobilization loan portfolio of over US$69 million (see Table 2). and microloans in urban areas. Supervised by the Approximately 80 percent of total outreach and Ministry of Cooperatives, the entire cooperative portfolio is accounted for by PACT UNDP. sector as of March 2012 was comprised of one apex, 20 unions, 461 federations, and 10,751 primary PACT UNDP. UNDP initiated a microfinance societies. project during the second phase of UNDP’s Human Development Initiative in 1997. The project activities The Central Cooperative Society (CCS) is the apex were initially implemented by three international in this sector. CCS recently received a microfinance NGOs (Grameen Trust from Bangladesh in the Delta 15 Interview with PACT, June 2012. 16 Interviews with Yoma and CB banks, June 2012. 17 Interviews with MIDB and Myanmar Oriental Bank, June 2012. 18 Interview with Central Bank, June 2012. 19 Data cited in this section were provided in June 2012 by CCS during interviews with the authors. 11 Region, GRET from France in Shan State, and PACT 6. GOVERNMENT ORGANIZATIONS from the United States in the Dry Zone). Following (NONBANK) an evaluation and in light of concerns about high costs of maintaining three distinct operations Through its various organizations (the women’s that had differing results, project implementation union and political party organizations), the across the three regions was consolidated under one government also plays an important role at the retail management system. In 2006, PACT was selected level. This may raise several concerns, including through an international bidding process to be the potential conflict of interest, but it does not threaten sole implementing agency. to crowd the private sector out of the market. As of March 2012, PACT UNDP operated in 25 The Myanmar Small Loans Enterprise was townships covering 5,984 villages.20 With 105 established in 1952 as the State Pawnshops branches and a total staff of 1,780, PACT UNDP Management Board. In October 1961, it became is the largest operator in Myanmar, it reports that a subsidiary company of the Burma Economic it reaches 365,410 active borrowers with a loan Development Corporation (BEDC) under the portfolio of 42,456 million kyats (US$51 million). name of the People’s Loans Company. When BEDC was nationalized in 1963, the People’s Other NGO initiatives are described in Annex B. Loans Company was incorporated first into the Note that the review team believes that even the People’s Bank of the Union of Burma and then largest NGOs will require substantial upgrades into the newly formed Myanmar Economic to their systems if they are to sustain robust and Bank as a small loans department of that bank. responsible sustainable growth. When the Financial Institutions of Myanmar Law of 1990 was promulgated, the small loans 5. SPECIALIZED AGRICULTURAL department seceded from the Myanmar Economic DEVELOPMENT COMPANIES 21 Bank and became a separate financial institution in 1992 under the name of the Myanmar Small Sixty specialized agricultural development Loans Enterprise. companies provide value chain financing for rice production (i.e., they provide seasonal loans along The newly established Microfinance Supervisory with seeds, inputs, fertilizers, etc.); 40–50 of these Enterprise (MSE), formerly known as the Myanmar are said to be interested in an MFI license under the Small Loan Enterprise (MSLE) has taken on new new Microfinance Law, according to the Myanmar responsibilities as a microfinance supervisor for the Rice Industry Association. These 60 companies entire sector. According to the World Bank (Seward as a whole extend an estimated 40 billion to 60 2012), MSLE issued 208,778 small-scale loans to billion kyats (US$45–65 million) in loans each microenterprises by March 2011, for a value of 31.3 harvest season, supporting about 200,000 farmers. billion kyats (US$37.6 million). Loans are short According to a list of 38 companies dated 9 July term and are issued largely against gold collateral 2011 and provided by the Myanmar Rice Industry with high interest charges (3 percent per month) Association, the largest two companies (Gold Delta and thus are similar in style to pawn shop lending and Kittayar Hinthar) had outstanding paddy loans operations. of 3.0 billion and 2.4 billion kyats, covering 76 and 176 villages, and reaching 6,866 and 6,824 farmers, The Union Solidarity Development Party (USDP), respectively. the ruling party in Myanmar, has lending operations in each of the 330 townships in the country. USDP charges 3 percent per month on its loans with a typical ticket size of 30,000 kyats. Repayment rates of these loans are unknown. Total outreach 20 UNDP emails, December 2012. is estimated to be around 500,000 for the entire 21 Data in this section are from an interview with the Myanmar Rice country.22 Industry Association, June 2012. 22 Interviews with World Vision and Asia Development Institute, June 2012. 12 MACRO LEVEL III. THE POLICY, REGULATORY, AND SUPERVISORY FRAMEWORK 13 Overall, the policy and regulatory environment market liberalization to follow broader structural has improved significantly over the past year. and macroeconomic reforms. Early progress However, weaknesses in regulations and includes the liberalization of the exchange rate to supervisory capacity will need to be fixed as soon a managed float in April 2012. as possible to ensure healthy development of the Reforms in telecommunications and upgrades sector. in all phases of infrastructure will be critical for increasing financial inclusion. The World Bank Note: The information in this section is sourced estimates that 75 percent of people do not have from the team’s review of unofficial translations access to electricity and only 12 percent of the of the Microfinance Law and its instructions, the roads are paved. Only 1 percent of the population Cooperative Law, and the Financial Institutions accesses the Internet, and 5 percent have access Law, as well as several reports from donors and to a phone. industry players (see bibliography in Annex E). The team also interviewed 24 industry players, B. Regulatory Environment including staff from the Central Bank and MSE. Many different laws and regulations can foster Revisions to the Microfinance Law Directives and or hamper financial inclusion. A more thorough Instructions (which do not require parliament analysis of all the other laws and regulations is approval) and more trained supervisors are recommended as part of the FIND and the MAP necessary to foster the growth of safe, sustainable, projects. (see examples in Box 1) and responsible MFIs. The most notable regulatory reforms to date are the November A. Policy Environment 2011 Microfinance Law, Notification 277/2011 and the Directives and Instructions 1&2 The country is witnessing a rapid evolution at (23 December 2011) from the Microfinance the policy level. The government appears eager Supervisory Committee, and Directives 1 from to create a more conducive environment for the Microfinance Supervisory Enterprise (23 banking and for broader financial inclusion. December 2011). A thorough review of all recent This is partly motivated by domestic pressures regulations noted in Box 1 is recommended as a (upcoming elections) and external pressures complement to this report. (entry into ASEAN and removal of sanctions). Several laws and regulations are currently being Box 1. Example of Key Regulation for Financial revised, and microfinance is among the eight Inclusion in Myanmar (as of June 2012 unless stated otherwise) priorities of the National Development Strategy. • Financial Institutions Law (1990)—being revised The term “microfinance� is mostly associated with • Foreign Investment Law (1988) new law was passed in collateral-free microlending in Myanmar. November 2012 • NGO Law Political influence within the financial sector • Central Bank Law (1990)—being redrafted runs deep. For example, the government has been • Cooperative Law (1992) involved in the direct provision of microcredit • Microfinance Law (2011), Microfinance Notification and through cooperatives since the 1970s and has Directives (2011) economic branches of the party in all the 330 • AML/CFT Law and regulations townships. Regional authorities also influence • Telecommunication Law (being revised) supervising and granting of licenses to MFIs. • Labor law The government plays a significant role in the banking sector, as evidenced, for example, Current regulations make it difficult for commercial by MADB providing subsidized credit to an banks to serve the poor. Banks cannot lend at estimated 1.4 million farmers. The banking sector an interest rate above 13 percent; this effectively will most likely undergo significant reform, with curtails their ability to lend profitably to low-income expectations for greater foreign investment and segments. Likewise, MADB has an interest rate 14 cap at 8.5 percent, which also limits any potential Box 2. Key Requirements for Licensed MFIs expansion. One positive development is the recent change in collateral requirements for secured • Have a legal status as cooperative, an NGO, or a private local transactions. Banks are now authorized to use or international company or organization gold as well as agriculture production as collateral. • Have minimum capital of 15 million kyat for nondeposit tak- This may prompt banks to increase their lending, ing and 30 million kyat for deposit taking especially since many people save in gold. • May provide loans and voluntary deposits (for time-being) • Have a maximum lending rate of 30 percent per annum or According to MSE, as of November 2012, 2.5 percent per month there were 118 licensed institutions, including • Have a minimum rate on deposits of 15 percent per annum six international NGOs, nine NGOs, 60 or 1.25 percent per month cooperatives, and 43 local companies. About Source: Microfinance Law and Directives, December 2011, unofficial translations half of them (63) have deposit-taking licenses. Cooperatives currently represent the largest share of licensed MFIs and are expected to continue to play a key role; however, they do not operate in The law’s new “instructions�23 also include some rural areas where the need is most pressing. MSE degree of consumer protection. For example, is keen to see international MFIs, cooperatives, Notification 277, Item 40, requires MFIs to and international NGOs expand into rural areas. regularly “notify the customers of the terms and conditions associated with their deposits Preliminary Analysis of the and loans, including the interest rate and the Microfinance Law and Instructions calculation method.� MFIs are compelled to comply with AML/CFT regulations. According to the new law: “Microfinance means extending microcredit to the grassroots people, There are several issues relative to the current accepting deposits from them, carrying out regulation: remittances, carrying out insurance business, borrowing money from local and abroad and 1. Limited differentiation between deposit-taking carrying out other financial activities.� Before and nondeposit-taking MFIs. According to global the new law, microfinance activities (with the good practices on microfinance (CGAP 2012), exception of PACT UNDP) were regulated on to enable depositor protection, deposit-taking the basis of Memorandums of Understanding institutions of significant scale require specific between NGOs/projects and the government. prudential regulation and supervision (adapted NGOs/projects did not have legal status, and from banking prudential supervision) that ensure therefore, their operations were relegated to these institutions are solvent. Lending-only MFIs the informal sector. The new law confers legal also require regulations, but none that directly status and enables licensed MFIs to provide aims to ensure their solvency (e.g., consumer credit, savings, insurance, and transfers (though protection, AML/CFT). this is limited, for the time being, to credit and deposits [see Directive 2 of 23 December]). MFIs 2. The minimum capital requirements are too low need to have legal status before they can apply especially for deposit-taking MFIs. Entry is too for a microfinance license (e.g., as an NGO, easy for small institutions with limited potential cooperative, or private company). MFIs looking for growth and could result in the supervisory to open a new branch need the approval of both authority being overwhelmed as well as in failure of the Region and the Supervisory Committee (see institutions. In comparison, the minimum capital Figure 3). requirements in Cambodia for nondeposit- taking MFIs is around US$70,000 and US$2.4 million for deposit-taking MFIs (National Bank of Cambodia 2012). 23 Note that some translations mention “instruction�, and other translations mention “directives� 15 3. The interest rate ceiling and the spread between de- investors. Myanmar’s mobile penetration rate posits and loans are too low. Myanmar’s operational is estimated at less than 5 percent with 3 million costs are typically high due to poor infrastructure, users, though the number of unique users could and inflation has historically been volatile (i.e., be as low as 1.3 million; a SIM card costs between estimated above 20 percent year-to-year, even $US 160 and $200 (Nomura Equity Research though officially it is at 8 percent). While infor- 2012)26. Given the lack of infrastructure, the mal lending rates are estimated at 10–20 percent nascent payment system, and the current monopoly per month (LIFT 2012), MADB lending rates are in the telecommunications sector, it could easily capped at 8.5 percent and commercial bank rates are take five to six years before mobile-phone-based capped at 13 percent per annum. While this ceiling branchless banking is fully deployed. The Post and is not so far from global average interest rates for Telecommunications Department is a division of microfinance, it may discourage MFIs from serving Myanmar’s Ministry of Communications, Posts rural areas in a sustainable way given the high trans- and Telegraphs. It aims at having 50 percent actions costs associated with serving rural clients. penetration by 2015 and has drafted a new law that might open up the sector to up to five MNOs 4. It is unclear whether group solidarity is a requirement (Nomura Equity Research 2012). At present, no for the lending methodology.24 This could restrict agent regulation or e-money regulation exists, certain types of institutions and available services. though Central Bank officials interviewed expressed Many households need types of credit other than strong interest to learn more from CGAP and group-based lending; individual lending can also others in these areas. be successful without collateral. C. Supervisory Capacity 5. It is unclear whether key prudential ratios are required in reporting. Documents that were reviewed There are two key challenges regarding the for this report show several reporting formats for supervision of microfinance activities: (i) the licensed MFIs that focus on net profit and loss, fragmentation of supervision and (ii) the limited but none of the formats requires reporting on key technical knowledge of the newly established MSE, prudential ratios. In addition some basic concepts, which, in its previous capacity, provided small such as loan portfolio quality, are not included in business loans on behalf of the Ministry of Finance. the documents reviewed.25 Fragmented Supervision Regulatory Environment for Branchless Banking As evidenced in Table 3, the supervisory structure The telecommunications sector is controlled by the governing the different types of financial inclusion state. It is unclear when it will open up to foreign institutions is highly fragmented. Table 3: Supervisory structure for key financial inclusion institutions—Draft Analysis Type of Banks Cooperatives MFIs MADB Pawn Shops Provider Central Bank of Ministry of Microfinance Ministry of Myanmar Supervisor Myanmar Cooperatives and Supervisory Agriculture Small Loan (CBM)a and line its regional offices Committee, Enterprise ministries for Microfinance and local state-owned Supervisory Enterprise, authorities banks and region aNote that CBM is a department of the Ministry of Finance and Revenue. Also, specialized banks (government and semi-government) fall under their respective ministers. 24 See Directive 1 of MSE. 25 For more information on key prudential ratios for microfinance deposit-taking institutions, see CGAP (2012). 26 According to the IFC Office in Rangoon,the cost had gone down to $US 120 by January 2013 16 Low Capacity of Microfinance monthly activities before the close of the month or a few days thereafter, which does not allow for enough Supervisor time for accurate reporting. MSE is the main agency responsible for daily MSE has 1,800 staff in 15 states/divisions across supervision of MFIs, even though it has no previous the country; not all of them are involved in MFI supervisory training. In addition, MSE maintains its supervision. At the state level, there are 92 supervisory traditional small loan operations. This double role as officials and an average of five to six staff per state.28 It a provider of financial services and supervisor is not has 32 staff in Nay Pyi Taw, including 10 supervisory usually considered good practice and raises questions officials. Currently, MFIs are active in only 12 states about roles and responsibilities. Some of this and divisions. MSE expects to increase staffing in confusion may be due to translation issues, because each region as necessary to meet growing needs. the Notification (implementing text of the regulation) It also is keen for staff to receive supervisory and is less than clear when delineating responsibilities.27 English-language training. MSE has little experience Because MSE expects the demand for small loans to in supervising financial institutions, and staff will be gradually replaced by microfinance, it does not require significant training.29 intend to stop or spin off the small loans. A list of other regulation and supervision areas to MFIs face other issues, including the fact that MSE research is included in the annex as inputs for future reporting deadlines vary across states and divisions. diagnostics. Providers are often required to report on their Figure 3: Overview of the Regulation and Supervision Structure 27 For example, paragraph 47 says, “the MFI shall accept the inspection of the auditors appointed by the Microfinance Supervisory Committee or inspectors assigned by the respective working committee of Region or state Government and Nay Pyi Taw Council.� 28 Note that these figures were collected during the IFC visit to Nay Pyi Taw; other sources mention a lower number of staff responsible for supervision. 29 Interviews with MSE in Nay Pyi Taw, June 2012 17 MESO LEVEL IV. FINANCIAL INFRASTRUCTURE, NETWORKS, AND TRAINING 19 The research focused on analyzing the retail • ATMs were introduced only this year in level and policy environment (micro and macro) Myanmar and, while the situation is evolving and did not undertake a thorough review of the rapidly, there were 88 ATMs in September market and financial infrastructure. However, 2012. Both Visa and MasterCard entered the preliminary assessments found that, similar to market in November 2012 (Robinson 2012). the rest of the financial sector, the meso level for MasterCard holders will be able to withdraw microfinance in Myanmar is under-developed money from the 36 Cooperative Bank ATMs, and evolving rapidly. and it is expected that MasterCard will sign licenses with other banks in the future (Than A. Financial Infrastructure and Kyaw 2012). Earlier in the same month Visa signed licensing agreements with three The financial infrastructure in Myanmar is still domestic banks: Kanbawza, Co-operative in its infancy stages compared to its ASEAN Bank, and Myanmar Oriental. Visa cards will neighbors. This weak financial infrastructure be used at ATMs and at some point-of-sales impacts microfinance in a number of ways. The machines (Than 2012). authors have listed below a number of issues • There is no real securities market (though and recent developments that could affect the securities are issued by companies and development of microfinance and financial banks, they are not listed on an exchange inclusion in the future. and, in most cases, are not traded). The • Myanmar currently has no credit bureau. government has issued limited government This could become and issue as economic debt, which is largely bought and held by development and financial sector competition banks. A Memorandum of Understanding increases. Having a credit bureau could help was established in March 2012 between the banks and MFIs reduce overlap and thus Central Bank and a partnership between the potential over-indebtedness. This is important Tokyo Stock Exchange and Daiwa Securities issue as some segments of the population may Group to share knowledge and expertise in be over-indebted (see demand section) developing a securities exchange. Daiwa has long-standing ties to Myanmar and attempted • The payment system is underdeveloped. A to establish a securities exchange in the mid- national switch is in the works but is not yet 1900s (Lwin 2012). operational. There is a short-term plan to tie the national switch to the regional switch. • A deposit insurance scheme that covers a maximum of 500,000 kyats per depositor • The Central Bank has sought assistance from was introduced by the state-owned insurance the Japanese Government to develop a cloud- company, Myanma Insurance. As of October based, high-speed network to support financial 2012, it is expected that all private banks will transactions throughout the country. The be required to adopt the deposit insurance network is estimated to cost US$384 million scheme, with an annual premium of 0.25 and will initially connect the Central Bank’s percent (Mon 2011). links in Nay Pyi Taw, Yangon, and Mandalay (McLaughlin 2012). • Western Union announced a partnership with Myanmar Oriental Bank, as its first • Use and acceptance of negotiable financial agent to offer Western Union money transfer instruments (e.g., checks) is expected in 2013. services in Myanmar. Western Union claims An interbank check-clearing mechanism that it will adjust its fees for the large needs to be developed concurrently with the number of migrant workers who send money introduction of checks or soon thereafter. back home. Although Myanmar Oriental 20 Bank has only 19 branches, it plans to open it comes to fostering a productive relationship small stations nationwide to offer more with the government. The current challenge is to transfers (Zin 2012). devise a structure that can incorporate the wide variety of institutions without compromising its • Some international audit firms are effectiveness. re-entering the market. PwC (Pricewater While there is no specific microfinance training houseCoopers) is expected to restart institute or center, two initiatives may address operations in November 2012. KPMG has the situation. CARD, in collaboration with the just opened its office in Yangon. KPMG plans German Savings Bank SBFIC, plans to provide to provide tax and advisory services initially capacity building to two emerging MFIs (Mingalar and audit services later (Deed 2012). Myanmar and Myanmar Egress). And PACT has launched a training program funded by LIFT B. Networks and Training for up to nine local NGOs to build capacity in microfinance provision. Institutions International rating agencies will play an Currently, there are no formal microfinance important role in the future. In July, Planet associations in Myanmar. There is a microfinance Rating conducted a review on PACT so that it working group (MFWG) that has an informal would comply with a LIFT request that all future membership made up primarily of international microfinance fund recipients obtain a rating from NGOs active in microfinance, including World an external rating service. Vision, PACT, Save the Children, AMDA, and GRET. Other smaller NGOs that plan to introduce microfinance include Mercy Corps and C. Research Entrepreneurs du Monde. There has been limited research conducted on the As of November 2012, 118 microfinance licenses sector. However, a recent LIFT Baseline survey were issued by the Microfinance Supervisory (2012) looks into use of credit, among other Enterprise mainly to local and international products. And the MAP Diagnostic is expected to NGOs and cooperatives. As the number and bring in international research bodies (FINSCOPE variety of licensed institutions grows, the value and CENFRI) to further analyze the sector. of membership should increase, particularly when 21 V. FUNDING 23 Funding for microfinance from international partnership with FinMark Trust and Cenfri. donors started in the 1990s through the United The MAP assessment will cover the demand Nations and then funding increased significantly side, supply side, policy, legal, regulatory and after the Nargis cyclone. supervisory, financial infrastructure, and client capability and protection. • While there is no formal microfinance apex30 in Myanmar, LIFT (a multi-donor trust fund • In September 2012, DFID awarded led by UNOPS created in response to the microfinance grants to GRET, Save the damage cause by the 2008 tropical cyclone Children, PACT, and World Vision to expand Nargis) provides funding to several MFIs. microfinance access to over 60,000 borrowers Contributors to LIFT for microfinance throughout Myanmar. include AusAid, DFID, and the EC. LIFT has granted more than US$12 million for • The World Bank Group has recently microfinance activities run by MFIs (UNDP/ opened an office in Rangoon and is using a PACT, Save the Children/Dawn, and joint approach wherever possible to support GRET). LIFT plans to work with the World the development of the sector. The World Bank on the FIND project, with UNCDF Bank is launching the Financial Inclusion on the MicroLead project, and on the MAP for National Development (FIND) project, diagnostic of Myanmar. It anticipates that which will primarily support MSE. Assistance funding will increase through a specific will focus on three main areas: (i) institution microfinance window, which is in the final building for microfinance supervision stage of approval by the LIFT Board. With through the reform and implementation of the recent arrival of a microfinance specialist, the microfinance law and regulations; (ii) LIFT will continue to play a significant role capacity building for MSE staff to perform its in the sector by coordinating donors, and supervisory functions and for microfinance funding certain MFIs. lenders in relation to evaluating borrowers and keeping accounts; and (iii) financial literacy • UNDP, a long-time supporter of microfinance, and awareness. According to the World Bank, has provided more than US$30 million for this assistance will be implemented in close microfinance over the past 15 years. UNDP alignment with the broader work to reform is developing a new three-year microfinance the financial sector in Myanmar as proposed plan for 2013–2015. The creation of a poverty in the Financial Sector Master Plan and other scorecard for Myanmar based on Grameen’s initiatives to improve access to finance by Progress out of Poverty Index (PPI) supports the Central Bank of Myanmar. Recognizing this new strategy. its need for support, MSE has requested training from various sources. IFC’s primary • UNCDF plans to support greenfield focus will be to develop capacity at the organizations at the retail level through the meso and micro levels. IFC plans to support MicroLead project, which is funded by LIFT. greenfields and provide a targeted sector-wide Its upcoming MAP diagnostic, also funded approach by supporting several promising by LIFT, is a diagnostic and programmatic implementers, such as international NGOs, framework to support expanding access to in their transformation and scaling up process; financial services for individuals and micro and supporting capacity building at the meso level; small businesses. The MAP framework creates facilitating the dissemination of international a space to convene a wide range of stakeholders good practice on responsible finance, branchless around evidence-based country diagnostics banking, and other key topics in collaboration and dialogue and leads to the development with CGAP; and partnering with World Bank of national financial inclusion roadmaps. The FIND on regulatory aspects. framework was developed by UNCDF in 30 CGAP defines an apex as a second-tier (or “wholesale�) fund that channels public resources to multiple retail financial providers 24 VI. RECOMMENDATIONS 25 The following are recommendations to strengthen analysis of the regulatory framework is necessary, the sector based on the findings of the review. the team suggests that a rapid review of existing Given that this report is a rapid assessment, the microfinance regulation by the World Bank, proposed next steps are indicative, and many in collaboration with CGAP, could enable the areas will require further research. The report government to make the necessary adjustments to was presented and discussed with over 40 key improve the safety and reputation of the sector. stakeholders at a meeting on 19 October 2012 in Yangon. It is envisaged that IFC will support Identify requirement for nonprudential several of the recommendations through its regulations. Nonprudential regulations should upcoming Myanmar Microfinance program, in be reviewed as part of an in-depth regulatory coordination with other donors and investors. framework review. The government may consider developing consumer protection regulations that enable transparency, fair treatment, and effective A. Policy, Regulatory, and recourse mechanisms. At the same time, a more flexible approach may be necessary with regard Supervisory Framework to the current interest rate ceiling for MFIs, which may be too low for MFIs working in Short term rural areas, where operational costs are higher. (next six months) Once the communication market is liberalized and the payment system is more advanced, the Review and adapt current microfinance government could explore how it can issue regulation. Given the fast growing number favorable agent banking and e-money regulations of licensed MFIs and the limited supervisory to foster the emergence of branchless banking capacity, current regulations need to be reviewed that can significantly increase financial access. in a timely fashion to ensure they are in line with international good practices.31 There is a risk that Review supervisory structure. The government MSE may create a situation where it does not may review its current supervisory set up to have the capacity to supervise the institutions that increase links between MSE and the Central it licenses to raise deposits. As supervisor, MSE Bank, which is responsible for bank supervision. should require sufficient minimum capital to In several countries, MFIs have transformed keep the gate sufficiently narrow for MFIs wanting into commercial banks that have become market to become licensed deposit-taking institutions so leaders (e.g., Equity Bank in Kenya), and the that it can effectively conduct onsite and offsite central bank is almost always involved in the supervision. For example, a distinction could supervision of deposit-taking MFIs in successful be made between those institutions that require microfinance markets (e.g., Cambodia, Pakistan). prudential supervision (mostly those that raise In many cases, a special unit of the central bank deposits) and those that follow nonprudential supervision department is responsible for the regulations (which apply to all MFIs and include supervision of MFIs. consumer protection). Licenses for deposit- taking institutions should require having significant minimum capital as well as reporting Medium term on key accepted prudential ratios, such as capital (over the next three years) adequacy ratio (see CGAP 2012). The law for cooperatives should be reviewed at the same time Strengthen the supervisory capacity. There is to prevent regulatory arbitrage whereby deposit- high demand from and urgent need by the taking cooperatives apply for an MFI license to current supervisor for training and capacity realize a “softer� regulatory regime. While a deeper building. While it will take some time to build 31 Namely CGAP (2012) and BIS recommendations. 26 up supervisory capacity, training should start current and future providers of financial services now. The Central Bank and MSE require world- to ascertain the specific needs of the segments class training on international good practices for they serve and adapt their services accordingly. regulation and supervision of microfinance and This should include an understanding of what it on accounting and English language. There are will take for people to put their money in a formal several training opportunities in the region and savings account, given the current lack of trust in globally, including the CGAP-Toronto Center the banking sector. Likewise, demand surveys Microfinance Supervisors Training Program and will help define key characteristics of payment the Boulder-Turin training. The Alliance for services (e.g., local transfers) and understand the Financial Inclusion (a network of central banks level of over-indebtedness. MAP will provide an working together on financial inclusion) also offers opportunity to research and analyze client demand learning opportunities through knowledge exchange information. with central banks. MSE has requested, and funders should consider funding, an experienced Medium term resident microfinance regulation and supervision (over the next three years) expert to provide direct hands-on support. English language will be an issue, so significant translation Support the emergence of sustainable retail of key international good practice documents is providers. Given the huge gap between demand highly recommended. MSE has recently recruited and supply of financial services, and the limited an English teacher. It may also consider recruiting focus on sustainability and international good a few bilingual staff who can facilitate knowledge practices of the current providers, the team exchange with international organizations and with recommends building up the capacity of those other supervisors in the region. providers that show solid potential for reaching scale in a sustainable and responsible manner and attracting internationally recognized greenfield B. Demand and Supply of banks. Microfinance • While 118 MFIs had obtained a license as Short term of November 2012, fewer than 10 have the (next 12 months) potential to become large-scale sustainable institutions. Donors and investors need to Gain a better understanding of the sector. This assess the potential of existing institutions sector assessment is not sufficient by itself to and build capacity using performance-based guide government policies and strategy for the contracts and international standards. It is development of financial inclusion. A more in- expected that promising MFIs will require depth review of certain areas of the assessment is technical support in human resources, necessary. For example, a thorough analysis of management information systems, product the prudential and nonprudential regulations design, risk management, and business (as mentioned above) and of the payment system plans. Although MFIs can remain NGOs, would be useful for developing longer term organizations that want to significantly scale policies. up will also need support for becoming limited liability companies as there is no precedent for It is also important to better understand demand this. for financial services and products, given the • Market demand is also large enough to absorb complex history of the banking and financial sector several international greenfield microfinance in Myanmar. The team recommends the industry banks that can both raise the bar and provide further research and understand the diversity of a demonstration effect for the industry. The the demand for financial services in Myanmar. As number of greenfield microfinance banks highlighted by the LIFT Baseline Survey (2012), that Myanmar can absorb will depend on the significant diversity of the population requires potential scale, target clients, and geographic 27 focus. Preference should be given to those that support and development. Most of these providers are willing to go to rural areas/down market, are small and have the potential to cause harm to those that have a strong responsible finance the sector through practices that are not client- track record, and those that are interested in focused. The potential for savings fraud among helping the sector improve. The government these smaller players should not be underestimated, and international funders should support such as it can escalate to foster further mistrust of the market entrants. These new entrants need to banking sector. Currently, there is a working group fully understand and adapt their business made up primarily of international organizations, model to the local Myanmar context. such as PACT, Save the Children, World Vision, and GRET. This group can play a significant role Ensure transparent and responsible financial as a convening body, particularly with an increasing services. The market is relatively new, so there number of organizations receiving their MFI is great opportunity to apply international best licenses. The association might play a significant practices early on, especially in areas of transparency role in increasing the technical capacity of its and responsible finance. Good examples of this are members. organizations that ensure they do no harm, put clients first, create demand-driven products, and Support the emergence of technical providers. are models of transparency in all of their operations Given the lack of human capacity, the industry and dealings. The team also recommends that key needs to attract more international experts and players endorse the Smart Campaign for client technical providers with a view to transferring protection and that the largest players get certified skills to local counterparts. One option would be by the Smart Campaign for client protection to to create an apex that is mostly focused on funding serve as models and promote broader client technical assistance for participating MFIs. It could protection within the industry. The team also also provide credit lines to promising MFIs until recommends that emerging MFIs report their they are fully capable of raising significant deposits financial and social performance to MIX (a global or raising funds from private commercial banks.32 platform for reporting on microfinance activity) In addition, donors should sponsor a critical mass with donor assistance, if needed. of national stakeholders to attend key training sessions, such as the Boulder-Turin training. Explore the potential for branchless banking. While the infrastructure is not yet available to unleash Medium term the potential of branchless banking to expand (over the next three years) financial access, the situation may evolve rapidly over the next few years. It will be important to Build a sound payment system infrastructure. consider how technology and global lessons learned A solid payment system is required to enable the on branchless banking can be used to expand sector to provide much needed payment services. financial services in Myanmar. The current payment system is underdeveloped. By supporting both the government and the private sector to develop a sound payment C. Market and Financial system, donors and investors will also facilitate Infrastructure the emergence of a financial ecosystem that can support new business models based on technology, Short term such as mobile phone banking and agent banking (next 12 months) using point-of-sale devices or other devices to undertake microfinance transactions, and also link Help strengthen the working group. With the rapid financial access with other kinds of services (e.g. increase in the number of licensed MFIs, there is a utilities). need to bring these organizations into a network for 32 For more information on good practices for apexes see Forster, Duflos, and Rosenberg (2012). 28 Explore creation of a credit reporting system. is likely to become a “donor darling,� the risks Credit information bureaus, when properly used, are high for duplication and high disbursement can reduce the risks of over-indebtedness, because pressure. However, LIFT has shown that effective they can help lenders to become more aware of donor collaboration mechanisms do work in the amount of debt clients are carrying. The team Myanmar. recommends exploring the creation of a credit bureau in which all key microfinance providers of Microfinance cannot effectively absorb very a certain size are required to report. large chunks of money, especially early on. A financial inclusion donor group could be set up D. Funder Effectiveness to include all funders interested in supporting microfinance in Myanmar. This group could build on LIFT and include other donors and Short term investors that support the sector. It also should (next 12 months) hold regular meetings. Funders could review their respective comparative advantage for supporting There is a clear opportunity in Myanmar to ensure the Myanmar microfinance market (e.g., human donor good practice from the start. The CGAP resources, funding instruments, technical know- country reviews (CLEARs) have demonstrated how, experience in the region, performance that good donor coordination can significantly measurement tools, etc.), and collaborate with contribute to the development of the sector (e.g., each other on this basis. The group could also Cambodia); conversely, the reviews have shown contribute knowledge to the upcoming MAP, that donors can have a negative effect on the sector adopt common reporting standards for MFIs, and (e.g., Nicaragua). Given the fact that Myanmar co-fund specific projects. 29 ANNEX 31 A. Summary of Opportunities and Challenges in the Market Strengths and Opportunities Weaknesses and Challenges  There is interest of several international MFIs  Governance is a concern due to past government intervention. and investors to enter the market.  There is low capacity of all institutions at the retail level  There are start-up NGOs with support from compared with rest of the region. regional technical providers.  The informal sector is active on lending and remittances, but  Several INGOs have significant microfinance these come with high prices (10–20% per month) and with operations, with PACT UNDP covering 80% of risks (hundys). the INGO outreach, World Vision, Proximity, Save the Children, and GRET.  The transformation process of INGOs will be complex (ownership and governance issues).  As of November 2012, 118 institutions had Micro Level obtained an MFI licence.  The cooperative movement has a mixed reputation due to previous crisis in the sector and historical government  Myanmar Agriculture Development Bank has intervention. large outreach with 1.7 million depositors and 1.4 million borrowers.  Commercial banks are not providing services to SME and microclients due to lack of capacity and expertise and to  Cooperatives also have a large outreach with unfavorable regulation. over 475,000 members.  Overall capacity of banks is low. There are only 88 ATMs in the  Private banks are now permitted to perform country, and debit cards are just being introduced. international banking operations; opportunity for international remittances.  Branchless banking is nonexistent, but there is a high level of interest from different players.  There are approx. 60 rice specialization companies with value-chain finance.  There is low mobile phone penetration (with SIM cards costing US$200), poor connections, and unstable electricity supply.  Government is committed to reform.  The supervisory capacity for microfinance is limited.  There is interest in innovation and new  There are weaknesses in microfinance regulation (min. technologies for financial inclusion. capital, methodology, interest rate, etc.).  The Microfinance Law creates legal space for  Supervision of microfinance is fragmented. previously informal MFIs. Macro Level  There has been a high level of government intervention  World Bank and other donors are prepared to historically. support supervisors.  There are lingering effects of the cooperative and banking  Opening up of banking sector may provide new crisis (1980s for co-ops and 2003–2004 for banks). opportunities for financial inclusion.  It is unclear whether cooperatives are well supervised.  The new Farm Law allows land titles to be used as collateral.  The World Bank project will support supervisory authority.  Technical support providers are entering the  Payment system is underdeveloped. market (e.g., CARD and Planet Finance).  The telecommunication sector is under-developed.  Microfinance Working Group is operational. Meso Level  There are no credit bureaus or collateral registries.  There is LIFT funding coordination.  Limited collateral types are allowed.  The upcoming MAP should prove helpful.  Microfinance Working Group has no legal status and  The payments and telecommunication landscape does not include many players yet (primarily INGOs is evolving and may provide opportunities for and donors). branchless banking.  There is a lack of training providers. 32 B. Profile of Key Microfinance cost of rice production). Loans are approved, disbursed, and repaid at the bank’s branch counters, Operators which are mostly located in township centers, after the government terminated its vehicular mobile banking services in 1998. Lending methodology is 1. INFORMAL SECTOR based on 5–10 members of group liability. (see Section III for details) MADB is the second largest financial institution 2. BANKS (STATE-OWNED AND PRIVATE) in Myanmar by number of branches (205). As of March 2012, MADB reported total assets of 116 Myanmar Economic Bank (MEB) is Myanmar’s billion kyats (US$132.6 million), total loans of 84 largest bank in terms of number of branches (325) billion kyats (US$96 million), and total deposits (Seward 2012). It evolved from State Commercial of 86.9 billion kyats (US$104.3 million). With a Bank (SCB), established in 1954, which provided a paid-in capital of only 2 billion kyats, MADB is wide range of commercial banking services across the thinly capitalized. It suffers financial losses due country. MEB continues as a state-owned financial to subsidized lending rates (8.5 percent lending institution, owned and supervised by the Ministry rate compared to 13 percent charged by other of National Planning and Economic Development, commercial banks), nonperforming loans resulting though the Central Bank has indicated that it is from directed lending programs (e.g., overdue slated for privatization. MEB operates primarily in loans of 91 million kyats from directed lending to urban areas. rubber plantation in mountainous areas through the Ministry of National Races and Border Areas MEB provides commercial banking services as Development), and low efficiency due to high well as development banking services to both of operational costs associated with operations in the private sector and the state sector (it provides rural areas where infrastructure is extremely poor. subsidized funding to Myanmar Agriculture More recently, the bank suffered major deposit Development Bank [see below], a specialized withdrawals with total deposits dropping to 68 agricultural development bank). According to a billion as of 21 June 2012, because its directed World Bank report (Seward 2012), government deposit rate of 8 percent is even lower than the bonds represented about 20 percent of total assets current inflation rate in Myanmar. The bank thrives in 2011, with loans representing only 8.3 percent. on government subsidies channeled through MEB. The bank has limited growth potential because of its small capital base, and it is not allowed to keep Myanmar Livestock and Fisheries Development Bank the profits. (MLFDB) used to be a state-owned bank owned by the Ministry of Agriculture and Irrigation. MLFDB Myanmar Agriculture Development Bank (MADB) is believed to be the only private or semi-private is owned and supervised by the Ministry of bank in Myanmar that provides microfinance, Agriculture and Irrigation.33 It has the mandate to primarily to farmers engaged in livestock and effectively support the development of agricultural, fisheries operations. Its scope is clearly different from livestock, and rural socioeconomic enterprises that of MADB, which primarily finances farmers in the country by providing banking services, engaged in paddy and other crops plantations. including loans (seasonal loans and term loans) According to a World Bank report (Seward 2012), and deposits (savings deposits from rural savers at over 55 percent of MLFDB’s loans are made to the 8 percent per annum). MADB is not allowed to agricultural sector. MLFDB has 53 branches and provide remittance services. Paddy loans represent has a unique business model for lending. As with 90 percent of its loan portfolio, with land registry other private banks, MLFDB requires collateral as collateral (50,000 kyats per acre for up to 10 for loans, 80–90 percent of which is in the form acres, representing one-third to half of the total of land or buildings. It is also conservative in 33 Information provided here on MADB is from a presentation made by MADB to the review team in June 2012. 33 lending against the collateral pledged; it has its The financial cooperatives are organized under own assessors in each branch to value collateral. the Union of Savings and Credit Federation Unlike other private banks, MLFDB has (tertiary level society), which has 41 savings experimented with other forms of collateral, and credit federations (secondary level societies) including equipment and fish/shrimp in cold and 1,625 primary level societies (as of March storage as collateral. MLFDB does not currently 2012). The Union does not currently have a plan to establish a subsidiary to do its microfinance microfinance license—a grace period is extended business (Seward 2012). to cooperatives under the new Microfinance Law. The Union lends to the primary societies at 3. COOPERATIVES 34 2 percent flat per month. It reports that, as of May 2012, it has an outstanding loan portfolio of Cooperative activities were introduced in Myanmar 1,086 million kyats, with a share capital of 60.72 at the beginning of the 20th century. Cooperatives million kyats. The Union also launched its own focus primarily on deposit mobilization and lending to individuals in June 2012. As a whole, microloans in urban areas. Supervised by the the Union reported savings of 24.2 billion kyats Ministry of Cooperatives, the entire cooperative and outstanding loans of 16.5 billion kyats, with sector comprises of one apex, 20 unions, 461 a total membership of 476,632. federations, and 10,751 primary societies (as of March 2012). Among thousands of primary-level societies, the Employee Savings and Credit Cooperatives The Central Cooperative Society (CCS) is the apex (1,191 primary societies), the Bazaar Savings in the sector. Under a newly received microfinance and Credit Cooperatives (304), the Microfinance license, CCS also operates 46 MFIs of its own Cooperatives (142), and the Agriculture Savings that function as village banks, covering seven and Credit Cooperatives (896) are the largest states and regions. With a total staff of 40 at the groups. The Employee Savings and Credit seven branches, CCS provides seed money to the Cooperatives serve government employees from MFIs—4.5 million kyats initially and an additional departments, schools, and hospitals, reaching 4.5 million kyats at the third month. The 46 a total of 265,199 members, with 17.2 billion MFIs, located in townships, have a total staff of kyats in savings and 6.7 billion kyats in loans, 252. The loans provided by the MFIs range from as of May 2012. The Bazaar Savings and Credit 45,000 kyats to 120,000 kyats, with a compulsory Cooperatives are community-based credit saving equivalent of 2.5 percent of the loan size. societies in urban areas with members comprising The interest rate for loans is 2.5 percent per month mostly market shop owners. These cooperatives flat (roughly 60 percent APR) and 1.25 percent for combined have 45,792 members, with 3.4 billion savings. Voluntary savings are no less than 1,000 kyats in savings and 5.5 billion kyats in loans. kyats. The Microfinance Cooperatives have 44,329 members, with 1.3 billion kyats in savings and According to CCS, the MFIs have 98–99 percent 2.3 billion kyats in loans. The Agriculture Savings repayment rates because the loans typically have a and Credit Cooperatives have 121,312 members, 60-day tenure and repayments are collected every with 2.3 billion kyats in savings and 2.0 billion day. As of May 2012, CCS reported total capital kyats in loans. of 152.65 million kyats, 32,851 total members, total savings of 340 million kyats, and total loan The Cooperative Bank (CB Bank), a private outstanding of 1.1 billion kyats. CCS appears to bank with 25 branches, is closely associated have a reasonable governance structure in place, with the cooperative system. It is owned by with its General Assembly being the ultimate 4,500 shareholders, including 1,500 individuals authority; its Board of Directors comprises 35 (representing 70 percent of shareholders) and members, including five full-time directors. 3,000 cooperative societies. CB Bank lends 34 Information provided here on CCS is from interviews with and handouts from CCS, June 2012. 34 to CCS, the union, and the primary societies, The microfinance methodology used in the PACT despite that fact that loans to the cooperative UNDP project is similar to that of the Grameen system represent less than 3 percent of its total methodology. It features several flexible options in loan portfolio. As of 6 March 2012, CB Bank the repayment schedules based on the type of loan reported total capital of US$40.69 million, total for which an individual applies. As a rule, repayments assets of US$732.22 million, and total profit of are made by regular installments according to US$11.46 million (as of 15 March 2012). CB agreed-upon schedules (weekly, bi-weekly, or Bank has an ambitious expansion strategy and has monthly). The major exception is agricultural loans, received Central Bank approval to expand its branch which are collected as a lump sum during harvest network from the current 25 branches to 55 branches time as a balloon repayment. The interest rate is 2.5 by the end of 2012. It has recently installed ATMs percent per month. According to PACT UNDP, and is in the process of launching an international repayment rates are close to 100 percent, and transfer business. It also plans to launch a debit card, most loans are meant for agriculture (34 percent), a Visa/Master card, and mobile banking. livestock (33 percent), and trading (21 percent). Borrowers can access higher loan amounts based 4. NGOs on successful repayment of previous loans. UNDP initiated a microfinance project in PACT Myanmar is an international NGO wholly Myanmar during the second phase of UNDP’s owned by PACT Global Microfinance Fund, Human Development Initiative in 1997. The which is registered in the United States. It entered project activities were initially implemented by Myanmar in 1995 by providing assistance to the three international NGOs (Grameen Trust from poor through income-generating projects. In 1997, Bangladesh in the Delta Region, GRET from France it started microfinance operations under the UNDP in Shan State, and PACT from the United States in project. PACT Myanmar engages in microfinance, the Dry Zone). An evaluation and concerns about health, and livelihood programs. the high costs of maintaining three distinct operations with different results led to the PACT Myanmar recently received a microfinance consolidation of the project implementations license under the new Microfinance Law even under one management system. Through an as it retains its NGO legal status. It operates in international bidding process, PACT became the the Magway region, which covers five townships sole implementing agency in 2006. (Minbu, Salin, Aung Lan, Myo Thit, and Pya Pone). It has 11 branches, with a total staff of 182 (171 As of March 2012, PACT UNDP operated in field based and 11 Yangon based). It plans to expand 25 townships, covering 5,984 villages. With 102 to another 14 townships by adding 40 branches by branches and total staff of 1,673, PACT UNDP was 2014. As of April 2012, PACT Myanmar had 48,041 the largest operator in Myanmar, reaching 365,410 active members. It reports an OSS of 200 percent. active borrowers with a loan portfolio of 52,701 million kyats (US$62 million).35 Proximity is a U.S.-based international NGO that has operated in Myanmar since 2004.36 It PACT UNDP offers 10 products, including eight features innovative and affordable climate-smart microloans (with loan sizes ranging from US$65 to technologies and services to villages nationwide. US$250), one microenterprise loan (with loan size Proximity has a customer base of around 100,000 up to US$1,875), and one microinsurance product. rural households that are predominantly small plot Because the insurance business is restricted by law, farmers. Products include foot-operated irrigation PACT UNDP launched the Beneficiary Welfare pumps, drip irrigation sets, water storage tanks, Program, which provides loan write-off and US$125 solar lanterns, financial services, and farm advisory for loss of life at a premium linked with loan size (1 services. Proximity delivers its products through an percent of loan amount applied). extensive agent network in 125 townships (out of a 35 Information provided here on PACT is provided by PACT through interviews and correspondence in June, October, and November 2012. 36 Information provided here on Proximity is from interviews and correspondence with Proximity through June and October 2012. 35 total of 330 townships in Myanmar), including 165 mission, World Vision is piloting and investigating private dealers, 800 village agents, and 1,400 village financial services with impact on vulnerable groups associations. To date, Proximity has delivered more and children. An additional focus is job creation than 110,000 products that have helped generate as financed income activities lead to employment income for more than 500,000 people. gains. Jobs sustained include loan recipients as well as an additional 30 percent of total borrowers. Proximity started credit lending three years ago. It has a total of eight offices, 135 sales and World Vision microfinance activities are supported collection officers, and 17 dedicated credit officers. with technical assistance and oversight from the It offers two loan products. The first enables farmers London-based VisionFund global network of to buy Proximity irrigation products and purchase 35 MFIs. VisionFund supported World Vision basic farm inputs (e.g., seed and fertilizer). Over Myanmar’s recent implementation of an industry- the past three years, Proximity has made a total recognized loan management information system of 42,517 of these loans, at an average loan size (MIS). Fully operational in October, the MIS will of around US$54. The second product is a crop lead to more secure reporting and improved social loan targeting small-plot rice farmers who need and financial analysis of client data. VisionFund to purchase inputs and hire labor. These are six- has also used its own experts to train MSE and month bullet loans with a flat rate of 2.5 percent microfinance practitioner supervisors in the area of per month on an average loan size of US$125. risk management. Repayment rates have been 97–98 percent on over 16,000 active borrowers. Save the Children is an International NGO with headquarters in London.38 It is funded by various World Vision is an international NGO that has sources on a global level and received grants from been in Myanmar since 1958.37 It provides a various bilateral and multilateral donors locally wide range of community development activities, in Myanmar. It started Dawn Microfinance in such as healthcare, infrastructure projects, school Myanmar almost 10 years ago, under agreements construction and education and nutrition support with the departments of Health and Social to children, agriculture and livelihoods trainings, Welfare. In June 2012, it registered and received a etc. It operates in 11 out of 14 states and divisions in microfinance license under the new Microfinance the country, with a staff of 850, mostly local. World Law. Vision started microfinance operations in Myanmar in 1998 with microloans to the agriculture and Save the Children offers microloans and takes commerce sectors. It currently operates in Yangon, savings from members only, primarily in rural areas Mandalay, and Ayeyarwady regions and Shan and and peri-urban areas in the outskirts of Yangon. Kayin states, with a network of 14 branches and 85 Loan sizes vary between US$40 to US$125, with a staff. World Vision reported total number of active loan period of six months and weekly or biweekly borrowers of 13,282 (83 percent women) and a loan repayments. It has also introduced seasonal portfolio of US $2.3 million with a loan range of agricultural loans in rural areas, with interest paid US$40–1,200 as of early November 2012. The loans biweekly and lump sum payment of principal after are mostly group loans that follow a methodology 16 weeks. The interest rate is 2.5 percent flat per similar to that of Grameen. Repayment rate is 99 month. Dawn Microfinance is currently expanding percent. Two-thirds of the loans are used for trade rapidly and preparing for transformation into a and production, 18 percent are for agriculture more commercially viable provider of financial purposes, and 12 percent are for the services services. sector. World Vision charges an interest rate of 2.5 percent flat per month. The standard loan period GRET is the first international NGO to receive a is six to nine months. Consistent with its social nondeposit-taking microfinance license under the 37 Information provided here on World Vision is from interviews and correspondence with World Vision in October and November 2012. 38 Information provided here on Save the Children is from contacts with Save the Children in November 2012. 36 new Microfinance Law.39 It started a microlending According to an incomplete list of 38 companies program in very remote areas in Chin State in dated 9 July 2011, the two largest companies 1995 with support from the European Union, (Gold Delta and Kittayar Hinthar) had outstanding UNDP, Stromme Foundation, and some embassies. paddy loans of 3.0 billion and 2.4 billion kyats, The program was set up using a network of covering 76 and 176 villages, and reaching 6,866 village credit schemes (i.e., a decentralized system and 6,824 farmers, respectively.39 enabling the community to be actively involved in the management of the service). Each village Yangon is the center of distribution for rice bank comprises 10 to 30 solidarity groups with five production. The Rice Industry Association and the members per group. Members of the group assume Specialized Agricultural Development Companies joint liability for the loans. In each village bank, were formed to coordinate among farmers, a credit committee, a management committee, traders, millers, and other companies on the a bookkeeper, and a cashier are chosen by the supply chain. The Rice Industry Association is a members and trained by GRET. The management 100 percent privately owned nonprofit association committee approves the loans, and the credit formed by various stakeholders of the rice committee disburses and collects money. The industry. Specialized Agricultural Development program reports that it reached operational Companies, usually one in each township, are sustainability in 2003. Since 2008, GRET typically owned by a few Yangon companies with introduced an individual microenterprise loan, export experience and local farmers, traders, and with the support of the European Commission, millers in the respective township, with a typical that uses individual lending methodology with paid-in capital of 1 billion kyats. It provides a two witnesses. The program also offers vocational bundled package to farmers, including technical training on off-farm businesses. It does not take assistance/capacity-building services, seeds, voluntary savings. fertilizers, rice milling, sales contract, etc., in addition to cash and in-kind lending at 2 percent As of October 2012, GRET had 6,155 active per month. An average borrower holds five to borrowers and a total portfolio of 840,041,000 seven acres and receives a loan of 70,000 to 80,000 kyats (US$988,283), covering four townships kyats per acre, compared to the 50,000 kyats per and 99 credit schemes (89 villages) in Chin State. acre they can get from MADB. An uncollaterized GRET reports a 100 percent repayment rate. group lending methodology is used. They report Most loans are used for pig and chicken breeding. a 95 percent repayment rate in the past three GRET charges 2.5 percent interest per month consecutive years. plus an application fee. Loans are based on bullet repayments, with 12 months for group loans and Specialized Agricultural Development Companies 18 months for microenterprise loans. provide an interesting supply chain model and are reported to have good credit policies with 5. SPECIALIZED AGRICULTURAL reasonable repayment rates. However, their market DEVELOPMENT COMPANIES reputation is not great due to funding constraints as their capital is limited and banks are not lending Sixty Specialized Agricultural Development without adequate acceptable collaterals. Companies provide value chain finance for rice production (i.e., they provide seasonal loans along The key stakeholders of the Rice Industry with seeds, inputs, fertilizers, etc.). According to Association are mostly successful businessmen the Myanmar Rice Industry Association, 40–50 who have close connections with the government. of these are interested in a microfinance license The new regulation for MFIs, with very low under the new Microfinance Law. The Association capital requirements, makes it possible for them to estimates that the 60 companies, as a whole, extend transform into MFIs. 40 billion to 60 billion kyats in loans during each season, supporting about 200,000 farmers. 6. GOVERNMENT ORGANIZATIONS— NONBANKS (see Section III for details) 39 Information provided here on GRET is from contacts with GRET in November 2012. 40 Information provided here on the Myanmar Rice Industry Association is from interviews with the Myanmar Rice Industry Association in June 2012. 37 C. Areas for Future Research at the Policy Level The following areas require further research; they • Foreign direct investment and banking sector laws. may be addressed in upcoming research and/or by It is important to understand the dynamics FIND and MAP initiatives: of this issue and when foreign investors will be able to engage in a joint venture. There are • Microfinance Law. There seems to be different indications of emerging partnerships (e.g., with requirements for local and international Singapore banks). organizations to get a license (see Appendix A of Directive 2). • Agent regulation. According to some of our interviews, an agent regulation is in the • Portfolio quality. How do MFIs report their works. It would be useful to find out more portfolio quality to the supervisors? There are about this regulation as it could open some no standards cited in the reporting formats new opportunities for branchless banking of the Microfinance Law Instructions. (see Duflos [2012]). • Transformation of projects and NGOs into for- • AML/CFT. According to the Central Bank, the profit MFIs. The transformation of the UNDP government has created a Financial Intelligence project into a legal MFI will raise several Bureau that includes the Central Bank. The team questions, as will the transformation of NGOs was told that the requirements from the AML/ into for-profit MFIs in the future. See Lauer CFT Law are quite strict and require showing (2008). an ID card and having two introducers. More research on how to adapt such requirements to • Consumer protection. Given the high level of low-income segments would be useful. over-indebtedness of farmers in several areas of Myanmar, it is important to explore how • Regulation and supervision of cooperatives. the current legal environment will protect The Ministry of Cooperatives has township clients against over-indebtedness and abusive antenna with up to 10 supervisors who control collection lending. cooperatives financial statements quarterly and conduct monthly onsite supervision. The quality • Bank downscaling. With the new conditions for of this supervision should be assessed. secured lending transactions, where gold and agricultural production can be considered as • Pawn shops. There are different opinions in the collateral, banks may be able to downscale in sector on how pawn shops are regulated and the future. Further research on this opportunity supervised. Additional research on that front would be useful. Bank downscaling could have would be welcome. regulatory consequences (e.g., how would the microfinance portfolio of a bank be regulated and supervised?). 38 D. List of Meetings The team met with the following institutions and organizations: Regulators and supervisors Central Bank of Myanmar Microfinance Supervisory Enterprise Banks Bank for Investment and Development of Vietnam Myanmar Agriculture Development Bank Myanmar Industrial Development Bank Yoma Bank Myanmar Oriental Bank Cooperatives Bank Microfinance organizations and cooperatives CARD Central Cooperative Society and Financial Cooperative Union GRET NGO Myanmar Rice Association/Specialized Agriculture Finance Companies PACT Proximity Planet Finance Save the Children World Vision Donors/DFIs/IFIs/Others Market experts UNCDF UNDP UNOPS—LIFT USAID World Bank 39 E. Research background To identify the technical assistance support needed to • Reviewed the current regulatory and supervisory improve access to finance and to inform future IFC framework for microfinance. investment decisions, the visit focused on mapping • The team met with representatives from Myanmar’s financial sector with a microfinance stakeholders involved in financial inclusion, focus. The research commenced in June 2012 including regulators; supervisors; representatives and was carried out by IFC’s Paul Luchtenburg, of state-owned banks, commercial banks, senior operations officer for Microfinance Advisory cooperatives, licensed MFIs, international Services in EAP; Li (Linda) Ren, senior operations NGOs, donors, DFIs/IFIs; and other market officer for Microfinance Investment Services in experts. Annex D offers a detailed list of these EAP; Li Yan Chen, associate operations officer participants. for Advisory Services; and Eric Duflos, East Asia and the Pacific regional representative for CGAP. This report presents a preliminary analysis and a broad snapshot of the microfinance sector and related macroeconomic and financial sector developments. • The goal of the review was to determine the This report and the information herein should landscape for microfinance in Myanmar and to not be considered definitive, particularly given the identify key potential partners. To achieve this, limited publicly available information in Myanmar the team did the following: and the nascent stages of Myanmar’s financial and • Assessed the overall environment, market, and microfinance sectors. role of sector stakeholders. Upcoming initiatives, such as the UNCDF MAP, the • Estimated the gap in access to financial services World Bank FIND project, and other donor works, for microentrepreneurs and low-income may serve to complement this report and enable populations. greater understanding. • Reviewed leading microfinance institutions/ programs in terms of (a) major challenges; (b) market outlook; (c) outreach and efficiency in delivering financial services to microentrepreneurs and the broader population; (d) management and operations, including range of services; and (e) potential to significantly expand and be commercially viable. 40 f. Bibliography ACTED and Banking with the Poor Network. 2010. “Microfinance Industry Report, Myanmar 2010.� Paris, France & South Brisbane, Australia, ACTED, Banking with the Poor in collaboration with the Foundation for Development Cooperation. Basel Committee on Banking Supervision. 2010. “Microfinance Activities and the Core Principles for Effective Banking Supervision.� Basel: Bank for International Settlement, August. Burma Lawyers Council. 1992. Cooperative Law. http://blc-burma.org/html/myanmar%20law/lr_e_ ml92_09.html CGAP. 2012. “A Guide to Regulation and Supervision of Microfinance.� Consensus Guidelines. Washington, D.C.: CGAP. http://www.cgap.org/sites/default/files/Consensus-Guideline-A-Guide-to- Regulation-and-Supervision-of-Microfinance-Oct-2012_0.pdf Duflos, Eric. 2012. “Can Myanmar Leapfrog towards Financial Inclusion?� CGAP Microfinance Blog, 6 July. http://www.cgap.org/blog/can-myanmar-leapfrog-towards-financial-inclusion-0 Economist Intelligence Unit. 2012. “Myanmar: White Elephant or New Tiger Economy?� London: Economist Intelligence Unit, April. FATF (Financial Action Task Force). 2012. “FATF Public Statement.� Paris: FATF, 22 June. http://www.fatf-gafi.org/countries/j-m/myanmar/documents/fatfpublicstatement-22june2012. html#Myanmar Forster, Sarah, Eric Duflos, and Richard Rosenberg. 2012. “A New Look at Microfinance Apexes,� Focus Note 80. Washington, D.C.: CGAP. http://www.cgap.org/sites/default/files/CGAP-Focus-Note-A-New- Look-at-Microfinance-Apexes-Jul-2012.pdf Government of Myanmar. 1990. Financial Institutions Law. http://www.blc-burma.org/html/myanmar%20law/lr_e_ml90_16.html Government of Myanmar. 1998. Foreign Investment Law. http://missions.itu.int/~myanmar/t&b/ invest01.html Government of Myanmar. 2011. Microfinance Law, November. Hookway, James. 2012. “Suu Kyui Makes Vows for Migrant Workers.� The Wall Street Journal, 30 May. http://online.wsj.com/article/SB10001424052702303674004577435330555569756.html Hussein, Feisal. 2011. “UNDP Myanmar: Formative Strategic Review of Microfinance Investments: Issues and Recommendations for the Future.� Bangkok: UN Capital Development Fund. McNulty, Lucy. 2012. “Myanmar Banking Sector Urges Foreign Investors to Wait.� International Financial Law Review, 11 April. http://www.iflr.com/Article/3009520/Myanmar-banking-sector- urges-foreign-investors-to-wait.html IMF (International Monetary Fund). 2012a. “World Economic Outlook Database.� Washington, D.C.: IMF, April. 41 IMF (International Monetary Fund). 2012b. “Myanmar 2011 Article IV Consultation.� Washington, D.C.: IMF, May. Lauer, Kate. 2008. “Transforming NGO MFIs: Critical Ownership Issues to Consider.� Occasional Paper 13. Washington, D.C.: CGAP, June. http://www.cgap.org/sites/default/files/CGAP-Occasional-Paper- Transforming-NGO-MFIs-%20Critical-Ownership-Issues-to-Consider-Jun-2008.pdf LIFT. 2012. “Baseline Survey Results.� Yangon: LIFT, July. http://lift-fund.org/lift-in-action/content/lift- baseline-survey-results-2012 Lwin, Sandar. 2012. “Central Bank Adds Further Effort to Securities Exchange Formation.� The Myanmar Times, 21 May. http://www.mmtimes.com/index.php/business/749-central-bank-adds-further- effort-to-securities-exchange-formation.html#.UKnmBe5-7Og.gmail Myanmar Ministry of Health, 2012, Powerpoint Presentation, Prevention and Control of Vaccine Preventable Disease, WHO Conference, Bangkok, http://whothailand.healthrepository.org/ bitstream/123456789/1836/4/Myanmar%20Country%20ppt%20Myanmar%20Final.ppt Myanmar Ministry of Finance. 2011a. Directives/Instructions 1 & 2 (23 December) from the Microfinance Supervisory Committee, and the Directives 1 from the Microfinance Supervisory Enterprise (23 December). Myanmar Ministry of Finance. 2011b. Notification 277/2011, December. Myanmar Ministry of Labour, 2012, “Country Brief: Unemployment Insurance in Myanmar, December. Thit, Nyi. 2011. “Myanmar Insurance to Offer Protection for Low-Income Bank Deposits.� Mizzima, 3 October. http://www.mizzima.com/business/6013-myanmar-insurance-to-offer-protection-for-low- income-bank-deposits.html Seward, James. 2012. “Myanmar Access to Finance.� Washington, D.C.: World Bank, January. Myanmar Times, The. 2012. “Private Insurance Companies Given a Go Ahead.� The Myanmar Times, 10 September. Myanmar Times, The. 2011. “Industry Calls for More Easing of Banking Restrictions.� The Myanmar Times, 14–20 November. Nomura Equity Research. 2012. “Myanmar—An Untapped Telco Market. The Appeal of 60mn People but Less Than 3mn Mobile Users.� Asia Telcoms, 14 March. Robinson, Gwen. 2012. “MasterCard Sets Pact to Enter Myanmar.� The Financial Times, 5 September. http://www.ft.com/intl/cms/s/0/ce48e8b8-f7a3-11e1-ba54-00144feabdc0.html#axzz2DIR3H7C9 McLaughlin, Tim. 2012. “Daiwa Sees Cloud Future for Myanmar.� The Myanmar Times, 27 August. http://www.mmtimes.com/index.php/business/technology/465-daiwa-sees-cloud-future-for-myanmar. html#.UKmbQxwx8KE.gmail Mon, Kyaw Hsu. 2011. “Saving Money Insurance.� The Myanmar Times, 10 October. http://www. mmtimes.com/index.php/business/1927-saving-money-insurance.html#.UKpVmuVE9fo.gmail 42 National Bank of Cambodia. 2012. Presentation at CGAP/SEACEN/Toronto Center Training for Supervisors, at SEACEN Training Center, Kuala Lumpur, Malaysia, June. Than, Zaw Win. 2012. “Visa Partners with Three Myanmar Banks.� The Myanmar Times, 5 November. http://www.mmtimes.com/index.php/business/2881-visa-partners-with-three-myanmar-banks.html#. UK19SJ59yTw.gmail Than, Zaw Win, and Aye Thidar Kyaw. 2012. “Mastercard Marks First ATM transaction.� The Myanmar Times, 19 November. http://www.mmtimes.com/index.php/business/3158-mastercard-marks-first- atm-transaction.html#.UKnqEvO6QyM.gmail Deed, Stuart. 2012. “KPMG Opens Office in Yangon.� The Myanmar Times, 5 November. http://www. mmtimes.com/index.php/business/2888-kpmg-opens-office-in-yangon.html#.UKnoG9t46t4.gmail Transparency International. 2011. Index. http://cpi.transparency.org/cpi2011/results/ UN (United Nations). 2011. “United Nations Strategic Framework 2012–2015.� United Nations Country Team in Myanmar, United Nations in Myanmar, Yangon. UNCDF (United Nations Capital Development Fund). 2012. “UNDP Formative Strategic Review of Microfinance Investments in Myanmar: Issues and Recommendations for the Future� New York: UNCDF, April. UNDP (United Nations Development Programme). 2011. “Integrated Household Living Conditions Survey in Myanmar, 2009–2010, Poverty Profile.� New York: UNDP, June. www.mm.undp.org/ihlca/01_ Poverty_Profile/PDFs/12%20Poverty%20Profile_Complete%20Report.pdf Wall Street Journal, The. 2012. “Myanmar Considers Letting Outsiders into Telecom Market Amid Overhauls.� The Wall Street Journal, 19 March. http://online.wsj.com/article/SB10001424052702304636 404577290733756605886.html World Bank. 2012a. “Financial Inclusion for National Development Program (FIND) Concept Note.� Washington, D.C.: World Bank, June. World Bank. 2012b. Myanmar “Interim Strategy Note for the Period FY13–14.� Washington D.C:. World Bank. http://documents.worldbank.org/curated/en/2012/10/16823059/myanmar-interim- strategy-note-period-fy13-14 Zin, Myat May. 2012. “Myanmar Oriental Bank Links with Western Union.� The Myanmar Times, 17 September. http://www.mmtimes.com/index.php/business/1463-mob-links-with-western-union-to-offer- money-transfers.html#.UKnrGGoo5RE.gmail 43 Myanmar All CGAP publications are available 37 Kaba Aye Pagoda Road on the CGAP website at Yangon www.cgap.org. Tel: (951) 662-866 Fax: (951) 665-537 CGAP Email: Cschneider@IFC.org 1818 H Street, NW MSN P3-300 Washington, DC Hanoi 20433 USA 3rd Floor, 63 Ly Thai To Street, Hanoi Tel: 202-473-9594 Tel: (84-4) 3934-2282 Fax: 202-522-3744 Fax: (84-4) 3934-2289 Email: cgap@worldbank.org Email: pluchtenburg@ifc.org www.ifc.org/eastasia January 2013 45