The Hope of Microcredit in Burma

Source: The Myanmartimes

PACT, a non-governmental organisation (NGO) five months ago, launched a loan scheme across the Irrawaddy Delta, which is the lowest expanse of land in Burma. Khin Mar Shwe, an entrepreneur who raises ducks is just one of 135 beneficiaries in Mawbi village who is part of this loan scheme. She borrowed 60,000 kyats (about $70) and thanks to the loan, the number of ducks she farms has doubled to more than 80. Khin Mar Shwe has explained, "Because there are more ducks, I get more eggs to sell and more money to use now."

Before, she turned to informal lenders for support, but the interest rate was at 20%. Rates in rural areas could even be higher for those that didn't have collateral such as gold or land. Even Sean Turnell, and economist at Macquarie University in Sydney said, "If you’re paying that interest rate, it’s going to be very hard to make a profitable return."

The Burmese economy, which has been ravaged by fifty years of millitary dictatorship has made the financial system suffer to the point where it is "a deeply unsophisticated, underdeveloped" financial system, Mr. Turnell went on to say. The results are, private loans are only accounted for 5% of Gross Development Product (GDP), compare that to 30% in Cambodia and over 120% in Vietnam.

The situation is worse in rural areas where there is "no finance available...truly nothing" even though microfinance has a "big role to play" in nation that is predominantly agricultural, Mr. Turnell explained.

Michael Knaute, CEO of the of the social entreprise, Oxus Development Network has explained "While it is still in an embryonic stage, there is no doubt about the development potential microfinance offers" "Before [donors] were a little reluctant because there was no legal framework, but now they are more likely to make it part of their strategy."

But even if microfinance is "an important element in rural development and poverty reduction", "this is not a magic bullet," warns Andrew Kirkwood, director of Livelihoods and Food Security Trust Fund (LIFT). It collects funds from Western donors and funds microcredit projects of several NGOs, including PACT, benefiting nearly 40,000 homes in over 2,600 villages.

In the villiage of Mwabi, PACT ensures that nobody is left out. Borrowers are encouraged to strive knowing that it is possible to obtain another loan if they pay their current loan on time. Daw Khin Mar Shwe would like to buy more stocks and diversify her stocks in the future. She explained, "If I get more money from a loan, I want to buy a pig...a pig is like a saving box."