Fostering Business Insights: Myanmar’s Opening Economy

 
This March, GIFT will conduct its first programme of 2020 in Yangon: Myanmar’s commercial capital and largest city.
GIFT was last in Myanmar in May 2018 working with Yoma Strategic Holdings: a Myanmar-based, Singapore-listed company with interests in real estate, consumer products and logistics. YSH wanted to develop a new consumer financing product to serve Myanmar’s growing middle-class, who were served by neither formal banks (who lent to the asset-rich) nor microfinance institutions (who focused on the poor).
Participants on the programme answered YSH’s question by developing Yoma Reach: a service that would offer unsecured financing to lower-middle and middle-class households. The model would leverage Yoma’s partnership with Wave Money: a joint venture with Telenor that is the market leader in digital money.
Yoma Reach would use Wave Money’s agents to help distribute loans and collect repayments. Usage of Wave Money and other Yoma businesses would provide data that would help determine creditworthiness. Myanmar’s high rate of smartphone ownership — one of Southeast Asia’s highest and fastest-growing, backed by some of the region’s cheapest mobile data — would help Yoma Reach capture this important data.
Please take a look at our project report from 2018 to learn what our participants produced.

Yoma and Wave Money’s successes

As Myanmar’s economy grows, interest in Yoma has also increased. In November, the Yoma Group received a $237 million investment from the Philippines’ Ayala Group. Ayala and Yoma also announced a joint venture to develop renewable energy and micro-power in Myanmar.
Wave Money has also launched new services since our programme. In March, Wave Money and Myanma Economic Bank launched the Digital Pension Disbursement Partnership, which would allow pensioners to withdraw their savings from any Wave Money agent (as opposed to from a bank).
This was followed in September with an announced collaboration with Yoma Bank to offer unsecured credit to Wave Money agents, which would allow them to operate more effectively. Agents are the backbone of Wave Money’s business — they collect and distribute money transferred through the app to users — and are often stall- and store-owners. Loans would be deposited in their Wave Money wallet, allowing agents to more easily process customer transactions.

An opening financial sector

Myanmar has Southeast Asia’s least-developed financial sector. Only 25% of Myanmar’s population has a bank account. 2000 bank branches and 2800 ATMs, mostly concentrated in its major cities, serve the country’s 53 million people. Caps on interest rates means that banks only serve wealthier and asset-rich clients.
However, in late 2018, Myanmar’s government passed several reforms to help open the financial sector. Foreign investment was expanded in both the banking and insurance sectors, and the government established a credit rating bureau. The government has also announced that it will loosen interest rate caps, allowing banks to serve a less wealthy (and higher risk) population.
Alongside other reforms and regulatory changes, these efforts helped Myanmar become one of the top improvers in the World Bank’s Doing Business 2020 Report.

Returning to financial inclusion and Myanmar

GIFT will return to the issue of financial inclusion in March in the 2020 Myanmar Global Leaders Programme. GIFT will partner with BRAC, the world’s largest NGO, to help them develop new financial services to a larger pool of customers.
People have turned to alternate methods of financing due to Myanmar’s limitations on the formal financial system. The country has a well-developed microfinance sector: almost 140 different organisations provide micro-loans and other services to Myanmar’s poorest.
BRAC has operated microfinance programmes in Myanmar since 2013 in an effort to reduce poverty and create new employment opportunities. BRAC has focused on two populations specifically: women and migrant workers, who often have restricted access to important financial services.
But changes in Myanmar will likely affect how microfinance operates in the country. Myanmar’s economic development will create a new class of lower-middle-class people with different financing needs. Loosened restrictions on the banking sector may open up new partnerships. And the continued explosion in smartphones and digital businesses presents new opportunities for innovative and novel business models, especially in the usually labour-intensive microfinance sector.
If you’d like to find out more about our upcoming 2020 Myanmar Global Leaders Programme, take a look at our brochure, and feel free to get in touch!