Myanmar’s Informal Financial Service Providers Take Advantage of Post-Coup Banking Crisis

By The Irrawaddy 12 April 2021

It has become a typical Yangon scene. Hundreds of customers lined up anxiously in front of every ATM in Myanmar’s commercial hub waiting for the chance to withdraw between 200,000 to 300,000 kyats (around US$140 to US$210) per day. Many people leave their homes before dawn, as soon as the nighttime curfew is over, either to line up at the ATMs or to join the queue for the limited number of tokens that allow them to withdraw money directly from private banks.

Yet despite rising early, many people return empty-handed as the ATMs quickly run out of money and the banks run out of tokens. Many wander from ATM to ATM and from bank to bank, despite the heavy presence of the regime’s security forces in Yangon.

“I have waited for nearly half the day. There were only ten people in front of me when the ATM ran out of money,” said one Yangon resident who was trying to withdraw her salary for March. “It is quite frustrating,” she said.

Residents in Yangon, the commercial capital line up to withdraw cash in front of a private bank on Monday./The Irrawaddy

Now, as people struggle to withdraw cash from ATMs and private banks, new informal financial service providers are emerging across Myanmar. These providers offer people the chance to access their money, as long as they are prepared to pay a service fee ranging from 3% to 10% of the money being withdrawn.

“It is very difficult to get a token from the bank and I can only take out 200,000 kyats at a time from the ATM. So I went to one of the new financial service providers. As soon as I transferred 10 million from mobile banking, they paid me in cash immediately. But I had to pay them 300,000 kyats as a service fee,” a local businessman told The Irrawaddy.

“Businesses have been constrained by cash shortages for a long time. Now many are using the financial service providers. It is an informal service, but we have no choice,” said the businessman.

“We don’t have to take the risk of searching for ATMs with cash or lining up for tokens. As soon as we call, the service providers just come to our door,” he added.

Last week, nearly a dozen people queuing at a KBZ bank ATM in Yangon were arrested by the security forces, without being told the reason why.

“For businesses, the service fee is not a problem. But for ordinary people trying to access their salaries, the service fee is a burden,” a staffer from an advertising company told The Irrawaddy.

“I only get 500,000 kyats a month salary. The service provider asked me to pay a 30,000 kyats service fee. I don’t know what will happen tomorrow, so I don’t dare to keep my money in the bank. So I have no choice but to pay them to access my salary,” she said.

Myanmar’s banking system has been paralyzed as pro-democracy supporters have successfully encouraged staff from the country’s private banks to participate in the civil disobedience movement in protest at the military’s Feb.1 coup. Since mid-February, businesses have suffered from a cash shortage as bank branches have closed down, except for mobile banking and limited ATM service.

Immediately after the coup, many people rushed to banks to withdraw their cash as rumors spread that the bank system would collapse.

The regime-appointed central bank introduced a new rule allowing daily withdrawals of 500,000 kyats from ATMs and directly from the banks. But since mid-March, customers at private banks are only allowed to withdraw 200,000 to 300,000 kyats daily from ATMs, while the banks hand out just 20 to 30 tokens per day for direct withdrawals.

Nor can supermarkets or shopping malls accept payment by cards anymore, following the shutdown of the mobile internet by the junta in March.

“We use mobile internet for the electronic payment system. So as long as the mobile internet is cut, we can’t offer an electronic payment system,” a branch manager from one of the largest retail and wholesale malls told The Irrawaddy.

“As we can’t use the card system, we have to keep cash to buy goods. Having cash has become vital,” a resident in Yangon said.

“We have no choice but to use the financial service providers to get cash,” she added.

Agents from Wave Money, the country’s largest mobile money transfer service, have also taken advantage of the crisis.

“We only had to pay a cash transaction fee to the agents in the past. But now they are asking for additional service fees from customers transferring cash with them,” a resident in Yangon said.

“The agents ask for 10,000 to 15,000 kyats for the transfer of 1 million kyat.  When I transferred money to my parents, I had already paid an agent the transaction fee. But my parents were forced to pay 15,000 kyats for the transfer as well. If my parents didn’t pay, the agent would refuse to transfer the cash,” she said.

An agent from Wave Money said that the double charges have become standard as the money shortage has impacted people.

“We have to line up in front of the bank as soon as the curfew has lifted. We are taking a risk as the security forces might arrest us,’ the agent said.

“People withdraw around 10 million kyats daily. Sometimes, we have to stop the service as we don’t have enough cash,” she said.

Foreign business people are also suffering from a money shortage as both cash withdrawals from the local bank and importing new funding from abroad has become difficult.

Under the previous government, the review process for new transactions from abroad only took a week. Currently, business people are not allowed to know the review process, a Japanese investor from Yangon’s Thilawa Special Economic Zone told The Irrawaddy.

“It has been four weeks already and I don’t even know what has happened to transactions coming from overseas. I am not sure where my money is,” he said.

“It is very difficult to run a business here now. We don’t know how long the crisis will last,” he said.

Myanmar’s banking system remains one of the most outdated in the region, despite the reforms that begun in 2011.

Reform of the financial system reform was a crucial agenda under the democratically-elected National League for Democracy (NLD) government ousted by the junta. The NLD liberalized most of the outdated rules and regulations, including laws on mobile financial transactions, as well as liberalizing the private banking sector and permitting foreign banks to open branches. Moreover, the NLD government was also focused on increasing the country’s financial inclusion rate, which measures the proportion of adults with access to at least one formal financial services product.

“The coup has destroyed all the reforms made over the last decade. Now, informal financial systems are booming again in the country. There is no doubt that we are going backwards,” said an economist who wished to stay anonymous.


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