Pending Questions on Microfinance in Myanmar/Burma

By Patricia Padilla Lara

As an Economic Development policy group, my colleagues and I  will be working on analyzing the challenges and opportunities of Microfinance in Myanmar/ Burma. Our interest on the topic comes from the fact that Microfinance is among the eight strategies that the government has prioritized for national development. Microfinance, which has proven to be an effective method for overcoming poverty in countries like India and Bangladesh, became a national tool to decrease the 26% of the population living with less than $2 (ppp) per day in Burma.

There are several mechanisms through which microfinance help citizens to overcoming poverty. First, it eases the access of poor households to credits in smaller and affordable amounts than those from the formal banking system. Second, it is more flexible regarding the collateral requirements and it offers lower interest rates than payday loans and other informal institutions. And third, microfinance institutions (MFI) often offer additional services like saving accounts and insurance. Therefore microfinance has become a source to mitigate external shocks and to boost entrepreneurship initiatives.

Microfinance can also play a significant role on the expansion of the financial sector in the country. As many other sectors of the economy, Burma’s financial sector has a vast room for improvement. Only ten percent of the population in the country has access to the formal banking system and there are less than 100 ATMs in the country. In 2011 a law was approved to incentivize the expansion of microfinance and since then there have been 133 MFIs created. Still, much remains to be done in order to have these institutions completely working but there is no doubt that the sector is becoming more and more dynamic.

However, the speed of the changes in the microfinance sector has left multiple open questions. Perhaps one of the most relevant is about the seemingly significant discrepancy between supply and demand of the different services. Even if there is a general agreement about the difference between these two, little is known about how the demand will behave if the supply of microfinance is available.  Previous analyses on the demand side tells us that microcredit will be of interest for the population. It is not possible to say the same about savings and insurance. Given the high inflation rates in the country, people prefer to save in gold and this is not necessarily going to change with the creation of new MIFs. PACT, the biggest MFI in the country, found that 15% of those clients accessing to microcredit also had voluntary savings. Unfortunately, this evidence is not enough to predict further financial behaviours of MFIs clients. In addition, more evidence is necessary to identify the impacts of microfinance on poverty eradication. It is clear that beneficiaries of microfinance are having better ways to overcome external shocks in their households, which is expected to reduce their vulnerability. However currently there is not enough information to understand additional results related to microfinance, for example, if the access to these services is creating over indebtedness or if actually having access to more reliable sources to lend money is leading to more sustainable productive practices.

Every consulted source for this blog entry suggest further assessments and deeper research of the microfinance sector in Burma. There is no doubt there is a favorable environment for microfinance in the country, however the challenges are still significant and the solutions are not completely clear or implemented.

Have You Packed Your Bags? If Yes, Let’s Take A Look At The Past Six Weeks

By Sessie Burns




Reflection: Part 1

As we get ready to take off on Friday, with only (1) throw clothes in suitcase and (2) get on plane left on the (Burma) to-do list*, it’s a good time to do a little reflecting on the first half of our project. I’ll start with some things I’ve (re)learned as part of this experience:

  • Never leave a meeting with clear “do-outs”- what needs to be done, by whom, and by when. I can go back through the meeting notes and see when we got more done from one week to the next, and it is clearly dependent on the explicitness of the deliverables for the next meeting.
  • Get more opinions than you think you need- this is not always true, but in dealing with the visa situation we found in hindsight that we got poor advice, which led us into a sticky situation. I don’t know that we could have known to get more advice that would have helped us, but I like to believe that there was something we could have done!
  • Be flexible- this is my way of reminding myself as we go into this next week of craziness.


Reflection: Part 2

Join the Burma/Myanmar club! I’ve spent a lot of my limited free time over the past several months doing passive research (read: documentary watching!), and below I picked out a few that stood out to me:

Al Jazeera Investigates – The Hidden Genocide (link to full video on YouTube): A heavy story about the situation of Rohingya Muslims in the Arakan state. Very explicit detail about personal stories of abuse. 

Anthony Bourdain Parts Unknown: Bourdain in Myanmar (link to full video on CNN): A lighter adventure into some of the tastes of the country! I’m especially excited to try the milky tea.

Burma VJ (link to the Netflix page, you can read a Rotten Tomatoes review here): Takes you through the events of the Saffron Revolution through the lens (literally!) of video journalists working in secret.

They Call it Myanmar (also linked to Netflix, a link to the movie site here): I was a little bit disappointed by how this documentary skated over issues related to ethnic diversity, but it provides a broad, if simplified, recent history and has beautiful shots of the country.

Reflection: Part 3

This trip would not be possible without a whole lot of people that I will not be able to name here. We got financial support from all over the school, our friends and families, and IEDP alumni. Our friends and professors have been resources and emotional punching bags. Researchers have given countless Skype hours of their time to share their experience with us, and people we have not yet met in Myanmar helped us to secure our visas in addition to inviting us to their organizations. Thank you, thank you, thank you.

–And we’re off! See you soon.–

*Exaggeration- there is no way any of my to-do lists ever have less than five things on them.

Since Burma Kyat will depreciation in one year, Burma doesn’t need to care the Natural Resource Curse?

By Hirokazu Yamasaki

Under an exciting transition, the Burmese government is now trying to open its economy and international firms are increasing their foreign direct investment. On the other hand, though Burma is a natural resource-rich country and depends on natural resource exports (See the export commodities graph.), it suffered from low growth late for a long time. This is th

e Natural Resource Curse, which is the theory explaining the negative relationship between the annual growth rate and natural resource export rate. According to CNBC, in 2012, the former World Bank chief economist, Joseph Stiglitz, insisted that Burma should avoid the Natural Resource Curse. Thus, the Natural Resource Curse has become an important topic for Burma.

One of reasons of the Natural Resource Curse is exchange fluctuation because the currency appreciation contributes to reduce natural resource revenues. In April, 2012, the government adopted the managed float exchange rate system and the government began to care currency fluctuation. In this section, I try to forecast Burmese Kyat (MMK) against US dollar (USD), China Yuan (CNY) and Japanese Yen (JPY) and determine whether currency fluctuation will contribute to the Natural Resource Curse in Burma in one year.


  1. Forecasting MMK

To forecast Burmese Kyat, I employ the following basic methods: the Uncovered Interest Rate Parity (UIRP) and the Relative Purchasing Power Parity (RPPP.) UIRP explains the currency fluctuation with the interest rate and RPPP shows the currency fluctuation with the inflation rate.

First of all, to use UIRP, we discuss each country’s interest rate. I employ 1-year interest rate of the Treasury Yield Curve using the FactSet data. According to the Central Bank of Myanmar, the Central Bank Rate is 10%.  Since there are few information about Burmese interest rate, I employ 10% interest rate for Burma. The interest rates are following:

Second, to forecast Kyat using the RPPP, we discuss forecasting the Burmese inflation rate. According to IMF, the expected Burmese inflation rate exceeds 6% by the end of 2013-2014 fiscal year and remain elevated in 2014-2015 FY. In order to simplify the calculation, I assume that in the next three years the Burmese government achieve the 6% inflation rate. In terms of U.S. inflation expectations, I employ the 3% inflation rate based on the University of Michigan Inflation Expectation. Regarding both Chinese and Japanese inflation rates, I assume that both governments achieves the inflation target, 3.5% and 2% respectively.

Based on my scenarios, I show my forecast for USDMMK, CNYMMK and JPYMMK as follows:

In general, I forecast that MMK will depreciate against USD, CNY and JPY in the next 1 year.[1]


  1. Won’t Burma suffer from the Natural Resource Curse?

If my analysis is correct, Burma will gain more natural resource revenues. This revenue helps stimulate its economy. However, the answer is no because other factors possibly cause Burma fall into the Natural Resource Curse. Long-term downward trend of natural resource prices is one example. Furthermore, according to the Arakin Oil Watch, transparency of natural resource revenue, promotion of equity, securement of land rights and poverty reduction are needed to avoid the Natural Resource Curse. Joseph Stiglitz also insists that inclusive growth prevent the Natural Resource Curse. In terms of Burmese Natural Resource Curse, social policies plays an important role.

Fortunately, we have opportunities to examine these social policies through IEDP classes. I believe that community-based approaches helps examine how Burma avoids the Natural Resource Curse and achieve sustainable development. I would like to seek measures to prevent the Natural Resource Curse, based on the points of local’s view.


[1] To forecast more accurately, we also have to consider the macroeconomic fundamentals. Furthermore, we need more data. There are only one-year Kyat data because the Burmese government has just changed its currency regime.

Why Myanmar(Burma)?

For any public policy wonk, the current situation in Myanmar is kind of a serendipity; to witness closely, how different policies implemented by agents in different sectors change or establish key institutions, which in turn change nations. It wouldn’t be exaggerating to say that the current situation in Myanmar resembles the policy lab that public policy professionals and academics have long lamented to be deprived of- in their own countries. And it doesn’t end here, there is a piece for everyone: from economic development guys to political reform and social policy fans, to researchers of ethnic conflicts, nation building and reconciliation pundits and environmentalists.

Moreover, due to the collective will formed inside the country – at least in discursive repertoire of public officials- there seems to exist a welcoming atmosphere among policy makers to hear new voices and international institutions on how to address their serious woes plaguing almost every measure necessary to hold their nation together. This is a great motivation for all those with a desire to make a difference in world, to believe that their professional recommendations will be heard and may well be implemented. Even the thought of having such an impact, and living to see the results of your work is thrilling.

It was these reasons that convinced the International Policy Center of the Ford School to choose Myanmar as the case country for International Economic Development Program of 2014. The unique history of country in the past decades and the pace that the country is changing, provides a situation of flux in policy making that is extremely suited for IEDP’s core philosophy, which is to provide hands-on experience through combining field research with classroom learning to analyze emerging issues.

A friend of mine on IEDP team, once told me “you know….It will be kind of cool, because in twenty years when Myanmar has developed and turned into a developed tourism hub, we can say that we were there, witnessed the change and contributed to it; “Tough my dear friend retains a highly optimistic perspective of Myanmar’s future, his statement bears some level of truth.


International Economic Development Program

It has been 15 years since the Ford School of Public Policy started the International Economic Development Program (IEDP). The rationale behind the program was that, as the domestic students could get hands-on experience in Washington D.C, Chicago and Detroit, the students with an interest in international development should have the same opportunities. The new program’s top priority was to create a space that would allow students with international development interest, to get that hands-on experience. the program was structured in a form that students would select a developing country to study and visit, investigate the economic development issues that affected the country, invite speakers with expertise in those areas to visit the classroom, and plan the trip—arranging interviews with policymakers, members of civil society, and foreign development agencies for the week-long spring break visit.

Combining field research with classroom learning to analyze emerging issues in international development, is the core philosophy of IEDP. At the first seven weeks of the program, the IEDP team dividing itself to several committees, each designated to a specific policy issue, creates and implements a course plan that gives student a solid grounding in the policy issues and challenges faced by the developing economy. The schedule for meeting with policy makers, social activists and other significant players through the trip, is planned in advance in this period.

The actual experience in the selected country lasts seven days. During the first six days, students met with mid- to high-level policy makers from NGOs, ministries, and businesses. Highlights include sharing perspectives with policy makers and getting feedback to analyze the differences and trips to see local agencies in action. The final day of the trip is for students to sightsee.

This year’s IEDP plans to study the Southeast Asian nation of Myanmar-Burma. The IEDP team will be in the country from March 2nd to 8th, 2014.