Myanmar and financial inclusion: A leapfrog in development

©Thomas Muncke/DPA/DPA Picture Alliance/AFP

U Chit Po is 49 years old and runs a grocery store in Myanmar. He is responsible for his wife and two children. He recently had a major health scare and consequently would like to retire soon. U Chit Po has no medical coverage, as there is no licence for the health insurance market in Myanmar. His income consists of profit from his small business and interest on loans to others, which he lends at 20% interest per day. He has never saved in a formal banking institution, but his knowledge about the value and complexities of saving are highly sophisticated. He feels that banks have so much red tape, especially for provisions which he might need to access at short notice, and the interest offered by banks on savings is so little that it is not worth the hassle.

Like U Chit Po, most adults in Myanmar do not use formal financial services. More than half of all credit in the country is sourced informally, through people like U Chit Po who on-lend their savings as a way of generating additional income. While such local intermediation plays an important role in the local economy, from a public policy perspective it means that such funds are not available for national investment.

For people who do use formal financial services, it is common for such usage to be limited to one service–a phenomenon known as being thinly served. Some 30% of the total adult population have access to a regulated financial service from a regulated institution, but only 6% have access to more than one (a combination of credit, savings, insurance and payments); this is higher for urban adults than rural ones.

The development of the rural financial system is particularly critical. Of all the segments of Myanmar’s economy, the rural sector is the most underserved by the formal financial system: only 2.5% of all loans go to this sector, even though it represents 30% of GDP and two-thirds of employment. Improving access to finance in rural areas could catalyse a process of agricultural modernisation and the creation of non-farm jobs, which would be critical for the future.

Thinly served populations result in adults using “inappropriate” financial services to meet a particular financial need. Like U Chit Po, 31% of the adult population in Myanmar experienced illness within their household or family that resulted in medical expenses. However, in the absence of health insurance, 47% of adults reported using credit, 27% sold assets or reduced expenditure, 22% used their savings, and 4% did nothing. In all these responses, adults are forced to rely on wealth-depreciating mechanisms, leaving them more vulnerable to shocks in the future and undermining the productive allocation of resources.

The UNCDF’s Making Access Possible (MAP) programme unpacks the realities of adults like U Chit Po across various economic groups based on their income profile to understand the needs of different segments of the population and to position the supply-side response within the current contextual and market challenges. These include a heavy reliance on paper-based banking systems, a rapidly changing political economy, and a modernising financial sector that will require new skills and approaches to meet needs on the ground.

MAP targets low-income consumers, as well as small and micro businesses, and hence its application in Myanmar is supporting the government’s objectives to improve access to financial services, reduce poverty, and catalyse jobs and economic activity.

To achieve this, UNCDF, in partnership with the Ministry of Finance of Myanmar, developed a roadmap for financial inclusion. By analysing the various options available, timelines and resources required, it will assist the ministry in developing policy and setting out its priorities for financial inclusion in the short, medium and long terms, and in attracting development partners to support specific areas of financial or other need.

The roadmap was presented at the Association of Southeast Asian Nations (ASEAN) Financial Inclusion Conference in Yangon in October 2014, which concluded with the Yangon Outcomes for Financial Inclusion, a set of recommendations to accelerate financial inclusion in the ASEAN region.

The Yangon conference was part of UNCDF’s programme Shaping Inclusive Finance Transformations (SHIFT), which aims to double financial inclusion in the ASEAN region by 2020.

With the recent changes in government and new investor interest, Myanmar is poised for growth. In its Economic Outlook for Southeast Asia, China and India 2015, the OECD Development Centre forecasts that Myanmar’s economy will grow by nearly 7.8% over the next five years. This has the potential to move millions of people out of poverty. There is growing evidence that financial inclusion can play a critical role in contributing to equitable growth policies that reduce poverty and inequality.

Given the current level of development of the financial sector in Myanmar, much work needs to be done to further expand access and, importantly, to improve the quality and depth of services offered to those already financially included. The roadmap will provide a structured approach so that the benefit of economic growth is shared across the poor and marginalised groups.


ASEAN Financial Inclusion Conference,

OECD (2015), Economic Outlook for Southeast Asia, China and India 2015: Strengthening Institutional Capacity, OECD Publishing.

OECD (2015), Multi-dimensional Review of Myanmar, Volume 2, OECD Publishing.

United Nations Capital Development Fund,


©OECD Observer Special offprint, July 2015


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