Afford Two, Eat One: A new report explores financial inclusion in rural Myanmar
Myanmar is a country with very low formal banking penetration, but changes are afoot. It will soon have its first country-wide 3G network. There is significant inwards investment, the impending development of more stable, flexible financial policy, and a stock exchange in 2015 that will stimulate domestic financial activity.
In March of this year a team from Myanmar-based Proximity Designs, Frog (another design firm) and strategy consultancy Studio D Radiodurans (which I founded) mapped the changing financial landscape in Myanmar. Over the two month project — funded by the Institute for Money, Technology and Financial Inclusion — we explored the diverse financial landscape for the poor in Myanmar and uncovered the nuances of income and loan cycles through over two hundred in-context, in-depth and ad-hoc interviews. We mapped behaviours around and attitudes to savings, investments, loans and transactions. We also explored the duality of development, how the poor balance their culture and beliefs with the advancement and globalisation of Myanmar, and how it has impacted their current lives and their outlook for the future. It’s a journey that takes in betel sellers, monks, motorbikes, goats and a lot of gold, with not a little of the afterlife. (More on that last point later).
The report starts by mapping the diverse informal and formal financial landscape including banks, peer savings groups, pawnshops and loan sharks, and explores issues such as motivations for saving, strategies for investment, and triggers for borrowing. It identifies 13 findings and 21 insights, as well as a number of opportunities for future products and services. It aims to provide a foundational reference for organisations wishing to develop products and services for financially constrained consumers in Myanmar.
Some of the findings map to what is known in other markets – albeit with characteristics that are unique to the locale. For example:
- In Myanmar (mostly Buddhist) faith-based lending groups are growing in popularity and have relatively low default rates, especially given cyclical and seasonal pressures. Savers and borrowers appreciate that unlike the larger banks, all loans, profits and other benefits are circulated into the local community.
- Globally, motivations for paying back a loan vary depending on context, culture, personality and circumstance. For many borrowers in Myanmar, defaulting on a loan would place a heavy burden on them and their family not just in this life, but also in the next.
- We learnt of the significance of the Novitiation ceremony in the life of a devout Buddhist Burmese, an event that results in them spending as much as US$1,700 at once, even though they earn less than $US10 a day.
- There are many examples of loan cycles out of sync with local crop cycles. Addressing this and many other known service offering and service design issues such as sign-up processes and opening hours would have a significant impact.
- Gold is often cited as a safe haven for savings, especially in Asia and particularly amongst the poor. In Myanmar one of the most obvious measures of financial fortitude is the number of gold bangles worn by the female traders in the town market. Gold jewellery has benefits for social occasions but is often pawned or sold at a steep discount: gold-merchants melt it and fashion new jewellery. However, not all gold of the same purity is of equal value: branded gold ingots from particular suppliers have a higher value than those bought elsewhere — clues are in the packaging and presentation, and some believe that the long-term value of gold will rise if bought on “auspicious” days.
- While the informal sector is diverse, a significant gap for mid-sized and medium/long-term loans exists.
- Economic migration within the country and to neighbouring countries has created regional labour shortages. Manual labour costs are rising and many farmers consider investing in a tractor tiller or other piece of farm equipment. The very narrow window of time between harvesting rice crops and preparing the next season’s field make current loan options unviable.
- While education is seen as a path to a better life beyond the village it is hindered by cost, the distance to the school and the opportunity cost of going to school. For those who can afford it, higher education is seen as the next step. For others, Grade 5 and beyond often involves choosing which one child will be educated.
The title of this report, “Afford Two, Eat One,” is a quote from a lady in Hnaw Pin village as she reflected upon her family’s well-being and her outlook for Myanmar, thoughts that were echoed in the words and deeds of numerous participants in this study. Although Myanmar is experiencing a period of openness, growth and opportunity, the poor still face significant challenges to achieving a stable income and lifestyle. So many people prefer to re-invest their earnings in business, family and the community rather than spend it on short-term comforts.
Studio D Radiodurans is extending the project with local partner Proximity Designs and funding from a global financial organisation to concept, design and pilot a new service. You can download the full report here: Afford Two, Eat One: Financial Inclusion in Rural Myanmar.