The future of finance in Myanmar is digital. The population has rapidly adopted smartphones, while the economy continues to operate almost entirely in cash. The mobile money ecosystem, while still nascent, is attracting attention from investors and journalists alike. Accion believes that mobile money will enable microfinance providers to substantially increase financial inclusion in Myanmar, and we will continue supporting our partner, DAWN Microfinance, to realize the substantial benefits of this digital transformation.
DAWN’s Founding and Accion’s Involvement to Date
DAWN Microfinance was founded by Save the Children Myanmar in 2002 to provide loans to groups of pregnant women, enabling them to afford prenatal care. Over the next 12 years, DAWN grew to become the third-largest microfinance institution in Myanmar, one with a strong reputation for client service and social mission, providing group-guaranteed loans to low-income women running small businesses from their homes.
When Accion began working with DAWN in 2014, the institution served just 25,000 clients, had a loan portfolio of approximately $2 million, and employed 60 loan officers across 11 branches. The loan operations process was highly time-intensive: loan officers visited groups of clients each morning to collect weekly loan installments, then spent their afternoons at the branch completing paperwork and manually preparing their “collection sheets” for the next day. New client training, marketing, assessments, and appraisals were reserved for Fridays, when no loan collections or disbursements were scheduled.
As an investor and partner, Accion worked to overhaul DAWN’s operational efficiency by implementing a basic core banking system that generates daily collection sheets for each loan officer. After twelve months of process design, piloting, training, and implementation, DAWN successfully completed the transition to a computerized portfolio management system, helping to improve loan officer caseloads by more than 30%. In the nearly three years since Accion partnered with DAWN, the company has grown to serve over 94,000 clients with a loan portfolio of almost $15 million, and employs over 200 loan officers across 27 branches.
DAWN’s next ambitious project is to use digital financial services to eliminate cash from its lending operations. Loan officers continue to spend at least four hours per day collecting cash installments from borrowers, counting the cash multiple times, and preparing cash disbursements for new clients. DAWN is working with agent networks and mobile money companies to design and test solutions that would reduce time spent managing cash. If successful, this project would enable loan officers to spend considerably more time recruiting and training new clients, conducting more thorough assessments of client businesses, providing financial literacy training to existing borrowers, and working with clients who are struggling to repay their existing loans.
Smartphones and Mobile Money
According to the Myanmar Telecommunications Ministry, over 90 percent of Myanmar adults had a cell phone by the end of 2016 (up from just 7 percent in 2012), with smartphone penetration approaching 80 percent of all mobile phones. Meanwhile, according to UNCDF’s 2013 Making Access Possible Report, only 6 percent of adults use a formal financial institution, and only 30 percent have access to a regulated financial service provider, such as a microfinance institution or credit union. Unregulated moneylenders and pawn shops are the most popular way for poorer Myanmar citizens to access credit. A 2015 Save the Children survey of three low-income areas in Yangon found that 85 percent of the population relied on short-term loans, and half of these loans were for food and basic needs. These unregulated sources of credit come at a steep cost — 10–20 percent per month for an unsecured loan and 3–5 percent per month if the borrower offers collateral, typically a small piece of jewelry, but pawn shops will also accept the family’s cooking pans. Digital loans, disbursed to a smartphone, can give low-income clients access to credit in cases where they would otherwise be forced to rely on a high-interest moneylender.
Simultaneously, Accion is helping DAWN design loan products to reach higher-income microentrepreneurs whose businesses are too large to benefit from a group-guaranteed microloan, but not large enough to qualify for a loan from a commercial bank. Using tested cash-flow analysis tools developed and implemented by Accion’s partner institutions around the world, DAWN will be able to offer uncollateralized loans to higher-value borrowers, enabling them to hire more staff, grow their businesses, and reach more customers. With the right partnership in place, these borrowers may be able to depend entirely on mobile money to transact with DAWN, freeing them to focus on managing their business instead of visiting their bank branch.
The confluence of high smartphone penetration with limited access to financial services presents an ideal proving ground for microfinance institutions and mobile money providers to offer digital financial services to Myanmar’s poor and underserved. In partnership with Myanmar’s emerging mobile money providers, Accion and DAWN Microfinance are working to capitalize on this unique moment in Myanmar’s economic development to ensure that financial services become as ubiquitous as the smartphone.
We thank FMO, MetLife Foundation, and the Keith V. Kiernan Foundation for their generous support for our work in Myanmar.