Cooperative Loan System Dogged By Corruption Complaints

By Htet Naing Zaw 27 December 2013

RANGOON — Villagers from Naypyidaw’s Ottarathiri Township have accused officials of corruption and nepotism in their allocation of loans to farmers through the government’s rural cooperative schemes, a local National League for Democracy (NLD) member said.

The complaints highlight long-standing concerns over the decades-old cooperatives system, which has been criticized as outdated and ineffective in addressing rural poverty.

Khin Maung Tint, chairman of the NLD in Ottarathiri Township, said farmers from Tet Shein village had sent a complaint to local authorities alleging that their village administrator had failed to provide cooperative loans to farmers and instead granted loans to friends and relatives.

“There are some people who were not given any loan because their farmlands had been confiscated but at the same time, there are some others who were given loans because they are somehow related to him [village administrator],” Khin Maung Tint alleged.

“Villagers who get along with the administrator only need to pay half of the interest rate,” he added.

Under the government’s cooperatives policy, groups of farmers and poor urban communities can apply for microfinance loans if they join local cooperatives.

Myint Aung, a spokesperson of the Ministry of Cooperatives, denied officials were favoring friends and relatives in the granting of loans. “Everyone, who is a member of a cooperative and pays regular fees of 5,000 kyat [US $5], can borrow money,” he said.

Zaw Myo, the deputy director-general at the ministry, acknowledged, however, that his ministry received recurrent complaints about nepotism among local officials in charge of granting loans through the cooperative system.

“Our ministry has received complaints from farmers stating that loans were only given to relatives or close colleagues of village officials,” he said, adding that his ministry struggled to oversee the vast rural cooperatives network that is disbursing about $100 million in loans to Burma’s poor.

“It is difficult for us to manage over 60,000 villages across the country,” Zaw Myo said.

A lecturer at the Civil Servant Training Department in Rangoon’s Hlegu Township said he had found that most officials involved in administering the cooperatives scheme were using it to enrich themselves.

“A percentage is cut from loans and taken by responsible officials,” said the official, who spoke on condition of anonymity. “One official I know has taken about three million kyat [USD 3,000] and invested it in his own business,” he alleged.

Burma’s cooperative policy was set up by the British colonial administration in the early 20th century. During past decades of military rule, the government continued to use the policy to address widespread poverty in the country.

There are more than 10,000 primary cooperative societies with 470,000 members in Burma, according to estimates of the International Finance Cooperation.

In August, Burma received $100 million loan from the Export-Import Bank of China, which President Thein Sein said he will use to fund cooperative programs that support farmers and the urban poor. The Chinese loan doubled the government’s budget for its cooperatives programs.

Opposition lawmakers and economists have questioned the government’s decision to expand its cooperatives program through Chinese loans, as the policy has proven an ineffective, is plagued by corruption and pushes farmers into debt.

“The cooperative system has never been successful in Burma’s history,” Dr Maung Maung Soe, a retired economics professor at the University of Distance Education in Rangoon, told The Irrawaddy in August, adding that Burma’s poor instead need interest-free credit through other programs.