In Presence of Dutch Queen, Govt Launches Strategy to Expand Microcredit

By Paul Vrieze 1 April 2015

RANGOON — Burma’s Ministry of Finance launched a new strategy on Wednesday that aims to expand access to financial services, such as microcredit and insurance, to a broader public in an effort to stimulate economic growth and reduce poverty.

The Financial Inclusion Roadmap was developed in cooperation with the UN Capital Development Fund (UNCDF), the International Finance Corporation (IFC) and other development organizations, and was launched in Naypyidaw in the presence of Queen Máxima of the Netherlands, who serves as the UN secretary-general’s special advocate for inclusive finance for development.

The new strategy seeks to overhaul Burma’s current, restrictive regulatory framework for the provisions of loans, savings, payment and insurance, so that financial institutions can expand these services to most of the population, and in particular to lower and middle income households.

The roadmap also aims to further develop microfinance institutions so that they can attract international and commercial funding for the growth of financial services in Burma.

In the country, access to financial services for low and middle income households or small and medium enterprises remains undeveloped as a result of military regime-era restrictions on the services and policies that gave state-owned institutions, such as state banks and cooperatives, a large role in providing credit.

The roadmap document said research into financial services in Burma “paints a clear picture of a market where although the levels of formal access stands at a moderate 30 percent, such access is thin [only 6 percent have access to more than one product], and even where available, the formal product frequently does not suit customer needs.”

Burma’s levels of access to microcredit are low compared with other developing countries in Southeast Asia, where microfinance institutions have expanded rapidly in the last two decades or so.

The government roadmap sets a goal of expanding access to financial services from 30 percent to 40 percent of the adult population by 2020 and increasing the number of people with access to more than one financial product from 6 percent to 15 percent.

Queen Máxima said improving formal financial services for low-income families in Burma would reduce their dependency on informal moneylenders and their vulnerability to financial shocks, such as illness or loss of harvest.

“Savings accounts and health insurance can help cope with these unexpected crises, thus making more money available for investing in a business, or sending your child to school,” she said in a speech at Rangoon University on Tuesday.

“For financial inclusion to make significant improvements in people’s lives, [financial] services need to be carefully regulated, safe, affordable, and designed according to the needs of customers,” she said. “This roadmap aims to establish a common vision of how to significantly expand financial inclusion—taking into account the needs of customers as well as banks and government.”

Julie Earne, a microfinance expert at the IFC, said one of the challenges for the planned expansion of financial services in Burma is the lack of large microfinance institutions (MFIs) that have experience with obtaining international capital that can be used to provide microloans.

“Here in Myanmar, the sector has grown up basically with donor [funding] … and very little commercial funding. As a result, these institutions have never had to finance themselves on a commercial basis,” she told The Irrawaddy. “There are some NGO MFIs that have started and are in early stages of scale, but their growth is constrained because it is very difficult for them to obtain funding.”

“In order for the sector to grow it needs access to different sources of funds,” Earne said, adding that the institutions needed to be well-managed and properly regulated so that they could attract capital through international commercial loans and by taking on savings deposited by the public.

UNCDF and Central Bank of Myanmar representatives could not be reached for comment on Wednesday.

Royal Visit Criticized

Queen Máxima visited Burma in her capacity as UN representative and talked to government leaders, Central Bank officials, financial sector representatives and also briefly met with Rangoon University students.

There was some criticism of her visit in the Netherlands in the light of a recent, brutal government crackdown in Burma on a student protest calling for Education Law reform.

The Burma Center Netherlands said in an open letter to the queen, “Because you are visiting Myanmar in these troubled times, we urge you, on behalf of all the Burmese struggling for democratic freedoms, to address the issue of the student arrests, and the importance of peaceful protests in a democratic society.

“We ask you to share your empathy with the students in prison and their families, as well as your concern about the pace of the reform process, now that the government is openly resorting to the methods of the dictatorship,” the letter said.

It was unclear whether Queen Máxima addressed these concerns in her moments with the students. She briefly took questions on Tuesday afternoon from the media, who had been instructed to focus only on the issue of financial inclusion.