Financial Inclusion on the Final Frontier: After years of isolation, Myanmar must build inclusive finance from the ground up
Called “the final frontier” by The Economist, Myanmar has been cut off from the rest of the world for the last 50 years. Following a military coup in 1962 and years of subsequent isolation, the country watched as decades of prosperity and global development passed it by.
That’s changing rapidly. A new government is helping Myanmar rejoin the rest of the world. The country has granted licenses to foreign banks, which are racing to open branches across the country. Coca-Cola, Colgate, and Unilever are investing. Mobile phone usage has rocketed from 1 percent in 2009 to 13 percent in 2014, and is expected to reach 80 percent by 2016, according to the country’s Ministry of Telecommunications and Information Technology.
Perhaps more than anywhere, the base of the pyramid needs investment, too. More than a quarter of the country’s population lives in poverty. Eighty to 90 percent of the Burmese people lack access to formal financial services such as savings, insurance and credit. Foreign investment in Myanmar will mean relatively little to the country’s poor if their fundamental financial requirements remain unmet.
Fortunately, that foundation is being built. In 2011, President Thein Sein identified microfinance as a key strategy for poverty reduction in Myanmar. That same year, the government introduced new financial inclusion legislation, which allowed local and foreign investors to establish wholly privately owned institutions in the country. The number of new financial inclusion entrants with the capacity to scale remains limited, but interest and investment is growing, regardless of the regulatory challenges that remain – interest rate caps among them.
Inclusive finance must be built from the ground up, and it will be incumbent upon those new entrants to approach it with certain values and principles established – and expected – from the very start. These include transparency, client protection, sound governance, social-performance management, and financial education. Clients must understand what their loans and other services cost. Bank staff must teach customers how their products work and why they should use them. Financial institutions must find ways to ensure their clients’ data and dignity are protected, and should be held to their economic and social aspirations through ongoing, rigorous assessment.
Those of us with the opportunity to do business in Myanmar will be an integral part of the change. We will have to make basic up-front investments to improve technology, train staff, and ensure that core operations can get off of the ground. As we do so, we must be patient, and work within the existing regulations today so that we might help improve upon them tomorrow.
Ultimately, those of us working in Myanmar must demonstrate that financial inclusion can have a profound impact on its people. We need to prove – to local entrepreneurs and regulators as much as to foreign investors – that it is a market where we realize not only financial, but also social, returns.
This is a unique opportunity to help deliver essential tools that Western countries take for granted – tools that allow individuals to expand their businesses, hire more employees, send children to school, and invest in a better future. The people of Myanmar have been waiting for half a century for a moment like this. Let’s not let them wait any longer.
Editor’s Note: Accion, in partnership with FMO and Triodos, has recently invested in microfinance operations in Myanmar.
Michael Schlein is President and CEO of Accion, a global nonprofit dedicated to financial inclusion.