世界銀行-小額金融宏觀挑戰(zhàn)-識別和應(yīng)對緬甸小額金融機構(gòu)面臨的制約因素

May2024

PublicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorized

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Micro-finance/Macro-challenges

IdentifyingandrespondingtotheconstraintsfacedbyMyanmarmicrofinanceinstitutions

3

Contents

Acknowledgments 4

Executivesummary 5

AshortoverviewofmicrofinanceinMyanmar 5

Impactofrecentshocks 10

Potentialresponses 15

References 20

Statistics 21

Figure1:FormalfinancialinclusioninMyanmar 6

Figure2:MFIloansbysector 6

Figure3:GeographicdistributionofMFIclients 7

Figure4:Loansoutstandingbystateandregion 7

Figure5:Distributionofloansbystateandregion 7

Figure6:MFIclientsandloansoutstanding 8

Figure7:NumberofMFIclients 11

Figure8:MFIloansandsavingdeposits 11

Figure9:ChangeinnumberofMFIclientsbetween2020and2023 12

Figure10:ChangeinMFIloansoutstandingbetween2020and2023 12

Figure11:Portfolioatrisk 14

Box1:TheMyanmarAgriculturalDevelopmentBank 8

Box2:TheclosureofPactGlobalMicrofinanceFundinJune2023 13

4

Acknowledgments

ThisreportwasauthoredbyNangHtayHtay(FinancialSectorSpecialist),KimAlanEdwards(ProgramLeader),SmitaWagh(SeniorFinancialSectorSpecialist)andKemohMansaray(SeniorEconomist).

ThereportwasproducedundertheguidanceofZaferMustafaoglu(PracticeManager,Finance,Competitiveness&InnovationGlobalPractice)andMariamJ.Sherman(CountryDirectorforCambodia,Myanmar,LaoPDR,andVietNam).

TheteamextendsitssinceregratitudetoThiDaMyint,andKhinThidaMawfortheirinvaluablesupport,andtoKyawSoeLynnandtheexternalcommunicationsteamoftheWorldBankfortheirassistanceandguidanceinpublication.SpecialthankstoMayOoMonandChawSuDevifortheiroutstandingadministrativesupport,andtoSaiNayLinforhisassistanceinformattingthereport.

Theteamexpressesitsdeepestappreciationtoallthosewhohavecontributedtothismicrofinancenoteandprovidedcommentsonearlierdrafts.SpecialthanksalsogotoparticipantsfromMyanmarMFIsandtheMyanmarMicrofinanceAssociation,anddevelopmentpartnersandagencieswhojoinedconsultationshostedbytheWorldBankinMay.Theirvaluableadviceandthoughtfulcommentsgreatlyenrichedthereport.

CoverphotographsarethecopyrightoftheWorldBank.Allrightsreserved.CoverimagesprovidedbyHongSar.

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Executivesummary

Microfinanceinstitutions(MFIs)playacriticalroleinMyanmar,providingbothruralandurbanpopulationswiththecredittheyneedtofinancepurchasesofworkingcapital,agriculturalinputs,andothergoodsandservices.Thesectorexperiencedrapidgrowthbetween2012and2020,withthenumberofMFIclientsreportedlyincreasingfromaround1milliontoaround6millionoverthisperiod.Alongsidefastgrowthinlending,MyanmarMFIshavecontributedsignificantlytofinancialinclusion,particularlyofwomen,whocomprised86percentofMFIclientsasofDecember2023.

ThispolicynoteprovidesashortoverviewoftherecenthistoryofthemicrofinancesectorinMyanmar,tracingitsrapidgrowthoverthedecadeto2020andassessingitscontributiontoeconomicactivityandthelivelihoodsofotherwiseunservedpopulations.ItanalyzestheimpactoftheCOVID-19pandemicandtheFebruary2021militarycouponMFIlendingandoperations,drawingonup-to-datedatafromtheFinancialRegulatoryDepartment(FRD)andsynthesizingthefindingsofrecentstudiesandsurveys.

ItshowsthatwhileMFIshaveexhibitedadegreeofresiliencetotheeconomicandpoliticalshocksthathavestruckMyanmaroverthelastfouryears,constrainedaccesstofundingandasharpincreaseinnon-performingloanshavelimitedtheirabilitytosupporttheirclientstotheextentthattheydidpriortothepandemic.ThenumberofMFIclientsandthetotalvalueofoutstandingloanshavefallensubstantiallysincetheendof2020,by43and32percentrespectively,withtheexitofPactGlobalMicrofinanceFund(PGMF)inJune2023contributingsignificantlytothesedeclines.Asaresult,thereisevidencetosuggestthatlargenumbersofclientsarecurrentlymissingoutonMFIloans.

Finally,itsetsoutseveralinterventions–basedonprecedentsandexperienceinMyanmarandintheregion–thatcouldhelpMyanmarMFIssustainandexpandtheiroperations,atatimewhennewlendingiscriticallyneeded.PotentialchannelsforprovidingfinancialsupporttoMyanmar’sMFIsinclude:(i)newcreditlinestoMFIstoalleviatefundingconstraintsandenableexpansionoftheirlendingoperations;(ii)risk-sharingarrangementswithbanks,suchasloanguarantees,toreducecollateralrequirementsandborrowingcostsforMFIs,and(iii)equityinvestmentsortargetedgrantstoallowMFIstowriteofflegacyNPLsand/orprovidetargetedsupportinspecificareasofneed.Suchmeasures,ifpursued,couldhelptosupportnewmicro-lending,raiseeconomicactivity–particularlyofwomeninlower-incomecommunities–andalleviateongoingpressureonthelivelihoodsofsomeofMyanmar’smostvulnerablepeople.

AshortoverviewofmicrofinanceinMyanmar

1.Myanmar’smicrofinancesectorgrewrapidlyoverthedecadeto2020.Between2012and2020,thenumberofmicrofinanceclientsreportedlyrosefromabout1millionto6million(toaround17percentofMyanmar’sadultpopulation).1Thenumberofindirectbeneficiariesofmicro-lending–e.g.membersofthesamehouseholdasMFIclients–islikelytobesignificantlylargeragain.TotaloutstandingmicroloansreachedUS$1.2billionasofearly2020,upfromlessthan$50millionin2012.AsofDecember2023,thereare178MFIsoperatinginMyanmar:116arelocallyowned,54areforeignowned,and8arejointventures.Thesectorisrelativelyconcentrated,withthetop25MFIs–almostallofwhichareforeignowned–controllingaround80percentofassets.

2.MFIshaveplayedavitalroleinprovidingmicroloansandotherfinancialservicestothosewhowouldotherwisehavelackedaccesstocredit.Formalaccesstofinance(throughbanksandotherregulatedfinancialinstitutionssuchasMFIs)increasedmarkedlyfrom30percentoftheadultpopulationin2013to48percentin2018(Finscope2018)–withthebulkofthisincreaseaccountedforbytheexpansioninthenumberofmicrofinanceclientsoverthesameperiod

(Figure1)

.TheexpansionofMFIloansplayedapivotalroleinsupportingotherwiseunderservedruralandurbanpopulations.In2020,overathirdoftotalloansbyvalueweredisbursedtotheagricultureandlivestock

1Theseaggregatedata(seealsoFigure7)mayoverestimatetotalMFIclientnumberstotheextentthattheyareaffectedbydouble-countingofclients:i.e.MFIclientswhotakeloansfrommorethanoneMFIhavethepotentialtobecountedmorethanonceinthesedata.

6

sector,whilemostoftheremainderwenttoclientsengagedincommercialtradeandotherservices,aswellasmanufacturing

(Figure2)

.Theproportionofagriculturalmicro-loanshasincreasedfurthersince2020withagriculturalborrowersprovingtobemoreresilientthanborrowersinothersectors(USAIDTIGA2023).Theseloansaretypicallyusedtobuyinputssuchasseeds,fertilizers,andpesticides,andareoftenstructuredtoallowfarmerstorepayaftersellingtheirharvests.MFIloansalsohelpmicroandsmallenterprisesengagedinmanufacturing,tradeandotherservicestomeettheirworkingcapitalneeds,withsomealsousingtheloanstofundinvestmentandexpansion.Someloans(includedaspartofthe‘services’categoryin

Figure2,

orrecordedseparatelyas‘education’)arealsousedforfamilypurposes,includingtocoverschoolfeesandmedicalexpenses(IFC2020).

3.TotalMFIassets(largelyloans)comprisearelativelysmallproportionoftotalfinancialsectorassets,butMFIsservesignificantlymoreindividualclientsthandobanks.AsofSeptember2020,MFIshadtotalloansoutstandingofaroundMMK2.5trillion,comparedwithprivatebanksthathadaroundMMK27trillioninoutstandingloans,andstate-ownedbanksthathadMMK4.2trillioninoutstandingloans(MMFAetal,2022,andFRDdata).ButMyanmarMFIsservedupto6millionclientsin2020(asreportedbyFRD)comparedtoanestimated2.2millionclientsinthebankingsector.Insomecases,MFIlendingisprovidedalongsidelendingfromthestate-ownedMyanmarAgriculturalDevelopmentBank(MADB;see

Box)

.

Figure2:MFIloansbysector

Figure1:FormalfinancialinclusioninMyanmar

%oftotalMFIloans

Manufacturing

Services

Trading

Agriculture

Livestock&Fisheries

Education

45

40

35

30

25

20

15

10

5

0

Dec-20Dec-23

01020304050

%oftotalpopulation

20182013

Women

Total

Men

Source:FinScope2018Source:FRD

4.Unlikebanks,MFIsplayanimportantroleinprovidingsmallloanstoclientsinruralareas,withoutcollateralrequirements.MFIsaresubjecttoamaximumloansizelimitwhichwasintroducedtoensurewidespreadaccesstoMFIcredit.ThemaximumloansizewasinitiallysetatMMK500,000inJanuary2014,butlaterincreasedtoMMK5,000,000inOctober2014,andfurthertoMMK10,000,000(aroundUSD6700)inApril2017.2ThemajorityofMFIclientsandloansareinruralareasoutsideYangonandMandalay(Figures3to5),insharpcontrasttothemuchmoreconcentrateddistributionofprivatebankloans.In2020,77percentofthevalueofprivatebankloansoutstandingweremadetoclientsinYangon,whileMFIlendingismuchmoreevenlydistributedacrossstatesandregions(Figure5).Moreover,despitethemuchsmalleroverallloanbooksofMFIs,insomestatesandregions(e.g.Ayewarwaddy,Magway,Sagaing,Mon)thekyatamountofMFIlendingrivalsthatofprivatebanklending

(Figure4)

,withmuchlargernumbersofclientsbenefittingfromMFIlendinginthesepartsofthecountry.Finally,allMFIloansareunsecured(byFRDregulation),removingakey

2Despitetheincreasesinborrowinglimits,thereisevidence(e.g.seeIFC2020)tosuggestthatasubstantialproportionofclientsborrowfromtwoormoreMFIstoaccessthedesiredamountofcredit.

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constrainttoaccesstofinanceamongruralpopulations.Incontrast,oftheprivatebankloansoutstandingin2020,only2percentwereunsecured(MMFAetal,2022).3InsomecasesMFIlendingisprovidedalongsidelendingfromthestate-ownedMyanmarAgriculturalDevelopmentBank(MADB;seeBox1),thoughMADBlendingalsorequirescollateralintheformoflandownershipcertificates.

Figure3:GeographicdistributionofMFIclients

(asof2020)

%ofpopulation

NayPyiTaw

Magway

Bago

Mon

Mandalay

Sagaing

Ayeyarwaddy

Yangon

Kayah

Tanintharyi

Shan

Rakhine

Kayin

Kachin

Chin

Millions

MFIclientsas%ofpopulation

MFIclients(RHS)

1.0

0.8

0.6

0.4

0.2

0.0

25

20

15

10

5

0

Source:FRD

Figure4:Loansoutstandingbystateandregion

Kyattrillions

3.02.52.01.51.00.50.0

(asof2020)

21.3trillion

Yangon

Mandalay

Ayeyarwaddy

Magway

Sagaing

Bago

Shan

Mon

Rakhine

Tanintharyi

Kayin

Kachin

Kayah

Chin

MFIsPrivatebanks

Figure5:Distributionofloansbystateandregion

%oftotalloans

80

70

60

50

40

30

20

10

0

(asof2020)

Yangon

Mandalay

Ayeyarwaddy

Magway

Sagaing

Bago

Shan

Mon

Rakhine

Tanintharyi

Kayin

Kachin

Kayah

Chin

MFIsPrivatebanks

Source:FRDSource:FRD

5.MyanmarMFIsplayaparticularlycrucialroleinprovidingaccesstofinancetowomen.Womencomprised86percentofmicrofinanceclientsasofDecember2023

(Figure6)

.MFIshaveplayedanimportantroleinincreasingwomen’saccesstofinancegiventheyoftenfaceadditionalbarrierstoaccessingotherformalformsofcredit(includingalackofaccesstohardcollateral).In2018,

3TheregulatedmaximumMFIinterestrateis28percentperannum(2.3percentpermonth),comparedwithmaximuminterestratesonbanksecuredandunsecuredlendingof10percentand14.5percentrespectively,effectiveMay2020.

85percentofsurveyedfemaleMFIclientsreliedonmicrofinanceastheironlyformofformalcredit,withwomenreportedlyhalfaslikelyasmentoborrowfrombanks.4

Figure6:MFIclientsandloansoutstanding

(asofDecember2023)

Numberofclients,millions

Loansoutstanding,billionkyat

GroupLoansIndividualLoans

MenWomenTotalLoans(RHS)

1,500

1,250

1,000

750

500

250

0

3.0

2.5

2.0

1.5

1.0

0.5

0.0

Source:FRD

Box1:TheMyanmarAgriculturalDevelopmentBank

Thestate-ownedMyanmarAgriculturalDevelopmentBank(MADB)hasbranchesinabout60percentoftownships,withthemajorityinrice-producingregionsinsouthandcentralMyanmar.ItisfundedalmostexclusivelybytheMyanmaEconomicBank(MEB),alsoastate-ownedbank.In2023,MADBprovidedloanstoapproximately1.8millionfarmers,servingasimilarmarketsegmenttoMFIs.

Typically,MADBdisbursesagricultureloanstosmall-scalefarmersattherateof150,000kyatperacreforpaddy(aroundUS$45atend-2023exchangerates)and100,000kyatperacreforothercrops.Farmerscanborrowagainstamaximumof10acresoffarmland,andMADBtakeslandownershipcertificatesfromfarmersascollateralfortheseloans.SomefarmershavereportedborrowingfromMADBwhileseekingadditionalloansfromMFIs(orinformallenders)totopuporbridgedelaysinMADBloandisbursements.

MADBlendingprovidedfinancialsupporttofarmersduringthepandemic,includingviaCOVID-19loantop-ups.Over80percentofsurveyedfarmersreportedgettingregularMADBloansand45percentreportedreceivingCOVID-19specialloansinthemonsoonlendingseason.However,MADBlendinghasfallensignificantlysincethattime:thevalueofmonsoonloansoutstandingasofSeptember2023wasabout50percentlowerthanin2020.

6.MFIloansinMyanmararepredominantlygrouploans,thoughtheimportanceofindividualloanshasrecentlyrisen.Grouplendingaccountedforabout92percentofthetotalnumberofloansdisbursedin2019,andintermsofclientnumbersgrouplendingcontinuestodominatetoday–withtheseloansprimarilybenefitingwomenborrowers

(Figure6)

.Thegrouplendingmodelmitigatesrisksassociatedwiththeprovisionofuncollateralizedloansastheburdenofrepaymentissharedcollectively.Thereisalsosomeevidencetosuggestthatthegrouplendingmodelhasgeneratedsocialcapitalwithincommunitiesbyincentivizingborrowerstomonitorandmoderatethefinancialbehavioroftheirpeers.The2022MFIhealthcheck(MMFAetal,2022)reportsthatmostMFIs(bothpre-andpost-pandemic)

4FinScope(2018)foundthat30percentofmenwerecurrentlyborrowingfromabank,orhaddonesointhelast12months,comparedto15percentofwomen.

8

9

predominantlymadegroup-guaranteedloansfor6to12monthsfor400,000to600,000MMK(US$200-$300):therelativelysmallsizeoftheseloansreflectsthewillingnessofothergroupmemberstoprovidegroupguaranteesontheirrepayment.Thatsaid,theproportionofindividualclientsandloanshasincreased,inpartreflectingeffortstoprovidelargerloanstolargerbusinesseswhocannotaccessfinancefrombanksduetointerestratecapsandcollateralrequirements(USAID2020).AsofDecember2023,clientsbenefittingfromindividualloanscomprisedaround18percentofallMFIclients

(Figure6)

.AverageoutstandinggrouploansperclientstoodataroundMMK400,000,whereasaverageoutstandingindividualloansperclientweresignificantlylargerataroundMMK1.2million.Giventhelargeraverageloansize,individualclientscurrentlyreceivenearly40percentofthevalueofallMFIloans

(Figure6)

.

7.MyanmarMFIsplayacomparativelysmallroleinacceptingsavingsdeposits,dueinlargeparttoregulatoryrestrictions.AsofDecember2023,only28MFIsoutof178operatinginMyanmarweredeposittaking.Untillate2016,MFIshadnotbeenallowedtotakevoluntarysavingsofmorethan

5percentoftheloanvaluefromtheirborrowers(“members”).Althoughthislimitwassubsequentlylifted,MFIsarestillrestrictedtotakingdepositsonlyfromtheirborrowers,andnotfromthegeneralpublic.MFIswhowishtotakevoluntarydepositsmustapplyforaseparatedeposittakinglicense,whichmandatesaminimumrequirementoftwoconsecutiveyearsofprofitabilityandoperationforaminimumofthreeyears.Themaximumamountofvoluntarysavingsfromactiveclientscannotexceed

10millionkyat.

8.MFIshavehistoricallyfacedconstraintsontheirabilitytoborrowfromlocalandforeignfinancialinstitutionsandinternationallenders.Withdepositsonlyaround6percentofloans(MMFAetal,2022),MFIsarerequiredtoeitherborroworrelyontheirequitytofundtheirloans.Butborrowingcanalsobechallenging.Priorto2015,localMFIswereonlyallowedtoborrowfromtheMyanmarEconomicBank(MEB).Asof2015-2016,MFIscouldborrowfromotherlocalprivatebanks,butborrowingwaslimitedbythemaximumdebt-to-equityratioof5:1,andthecollateralrequirementsimposedbylocalbanksincreasedtheeffectivecostoffunds.InternationalMFIscanborrowfromformalfinancialinstitutionsoutsidethecountry,subjecttothemaintenanceofamaximumadebt-to-equityratioof5:1andamaximumindividualloanamountofUSD3million.In2016,anewregulationwasissuedwhichallowedinternationalMFIstoborrowfromlocalbanks,andlocalMFIstoborrowinternationally:thiswasanimportantdriverofsubsequentgrowthinMFIlending(USAID2020).Nevertheless,foreignloansrequireapprovalfromtheCentralBankofMyanmar(CBM)throughFRD,whichoftentakesseveralmonths.Inadditiontoprovidingtechnicalassistancetothesector,developmentpartnershaveplayedanimportantroleincatalyzingforeigninvestment,hedgingforeigncurrencyrisks,andprovidingguaranteesforfundingfromlocalbanks,mitigatingtheimpactofcostlycollateralrequirements.

9.Thebroaderregulatoryframeworkhasevolvedsince2011,supportingthegrowthoftheMFIsector.TheenactmentoftheMicrofinanceBusinessLawin2011pavedthewayformicrofinanceinstitutions(MFIs)tobecomeimportantprovidersoffinancialservicesinMyanmar.ThelawaimedtoestablishalegalframeworkforMFIstooperatetransparentlyandsustainably,withtheobjectiveofpromotingfinancialinclusionforlow-incomehouseholdsandmicroenterprises.Thisframeworkallowedbothlocalandforeigninvestorstoestablishfullyprivately-ownedMFIs,andauthorizedthoseforeign-ownedMFIsthatwereoperatingbeforethelawwasestablished.Severalregulatoryandsupervisoryagencieswereestablished.TheMicrofinanceBusinessSupervisoryCommittee(MBSC),formerlyknownasMyanmarMicrofinanceSupervisoryEnterprise(MMSE),wasformedundertheMinistryofPlanning&Finance(MOPF)andchairedbytheMinister.InSeptember2014,theFinancialRegulatoryDepartment(FRD)wasestablishedundertheMOPFtoprovidesupporttotheMBSCandtoregulateandsuperviseMFIs.

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10.Significantprogressinimprovingtheregulatoryframeworkwasachievedinthenextfewyears.FRD,throughtheMBSC,implementedseveralkeyprudentialregulations,includingonsolvency,liquidity,andriskmanagement,inlinewithinternationalbestpractices.Theseregulationsplayedanimportantroleinensuringthestability,sustainability,andsoundnessofthemicrofinancesector.Additionally,regulationswereintroducedthatimposedlimitsonasingleborrower,emphasizingtheimportanceofstringentcontrolsoverrelatedpartylendingtopreventpotentialrisksandfailuresofMFIs.Separateinstructionswereissuedforloanportfoliomonitoring,includingdirectivesforloanprovisioningandmanagingNPLs,aimedatenhancingoverallfinancialstabilitybysafeguardingMFIs’solvencyandpreventingfailures.In2019,FRDissuedadirectivemandatingthatallMFIsshouldcomplywithcustomerduediligenceguidelinesforAML-CFToversight.5

11.However,anewdraftMFIlawthatwaspreparedin2018-19wasnotsubsequentlyenacted.ThedraftlawwouldhaveallowedMFIstotakedepositsfromnon-borrowingcustomerswhoresideinthetownshipswheretheMFIislicensed,broadeningthepoolofpotentialcustomers,bolsteringaccesstofinancialservicesandincreasingMFIs’accesstodepositfunding.ItwouldalsohaveallowedMFIstotakecollateralonloans,tosupporttheirriskmanagementeffortsinthecontextoftherecentexpansioninindividuallending.

Impactofrecentshocks

12.TheCOVID-19pandemicwasasetbacktotheexpansionoftheMFIsectorinMyanmar.MFIclientnumbersplateauedin2020

(Figure7)

.Repeatedlockdownsandsocialdistancingmeasuresdirectlyimpactedtheface-to-facebusinessmodelsofMFIs,hamperingbothloandisbursementsandcollections.Growingriskaversioninfinancialmarketsexacerbatedpre-existingfinancingissues.Andtherealeconomicslowdownstressedclients’abilitytorepay,leadingtoaspikeinNPLs.Basedonreportspriortotheonsetofthepandemic,theNPLratiostoodatlessthan1percentin2019.ButCOVID-19spurredasharpsurgeinNPLs,withMMFAdataindicatingthattheportfolioatrisk(repaymentsoverdue>30days)hadincreasedto12.4percentoftheoverallloanbookbytheendof2020

(Figure11)

.

13.Nevertheless,thegovernment'seffortstoprovidepolicyreliefandfinancialsupportin2020playedasignificantroleinmaintainingtheresilienceofMFIsanddrivingcontinuedgrowthintheirlending

(Figure8)

.

?AspartofitsCOVID-19economicreliefplan,thegovernmentallocatedMMK200billionfromitsgeneralreservefundtowardMFIs,whichwasdisbursedthroughMEBundertwoloanschemes:

i)three-yearmaturityloanswithoneyeargraceperiod,withmax11.5percentinterestrate;ii)one-yearloansata1percentinterestrate,tobeon-lenttoteashopsandrestaurantsatamaximum2percentinterestrate,withtermsreplicatingtheunderlyingloan(IFC2020).SomeMFIswerealsograntedloandeferments.

?SeveralpolicyreliefmeasureswereimplementedbytheFRDthroughtheMBSC.Adirectivewasissuedtoeaseloanlossprovisioningrequirementsfrom2percentto1percentofthetotalloanportfolio(includingNPLsandrestructuredloans).Additionally,MFIswereinstructedtotemporarilysuspendthecompulsoryrequirementforborrowerstomakesavingsdeposits,ceaseloancollections(andinterestaccruals),andrescheduleloantermsandmaturities.

14.TheoperatingenvironmentforMFIshasbecomemuchmoredifficultintheaftermathoftheCOVID-19pandemicandtheFebruary2021coup,withacorrespondingdropinlendingtopopulationsinneed.TherehasbeenamarkeddeclineinbothMFIclientsandoutstandingloanssince2021

(Figure7

and

Figure8)

.AttheendofDecember2023,thesectorhad3.5millionclients,

5FurtherdirectivesrequiringMFIstoimplementAML/CFTrisk-basedmanagementstrategieswereintroducedin2022.

11

0

withaloanportfoliovaluedatunderMMK2trillion,bothwelldownfrom2020levels

(Figure7

and

Figure8)

.AsofDecember2023,thenumberofMFIclientsandthevalueofoutstandingloanshaddeclinedby43percentand32percentrespectivelyoverthepreviousthreeyears.

15.TherehavebeenseveraldriversofthefallinMFIlendingandclientssinceearly2021.AsofJune2022,74percentofMFIshadreportedlyexperienceddeclinesinclientnumberscomparedtoDecember2020.TheMFIsectorhadlost315,000clientsor8.1percentoftotalclientsasofJune2022,withthevalueofloansdecliningbyaround10percentoverthesameperiod(MMFAetal,2022).MFIshavereportedinsufficientliquiditytomakenewloans,includingbecauseofadeclineinrepaymentsfromoutstandingloans(aswellasarangeofotherfundingissues;seebelow).Moreover,asharpincreaseinNPLsin2020and2021forcedMFIstoreducetheirnumberofcustomers(throughloanwriteoffs/forgiveness)andtakeamorecautiousapproachtonewlending,leavingthemwithasmallerclientbase(USAIDTIGA2023).MFIsalsofacedseveraloperationalconstraintsoverthisperiod,includingheightenedsecuritychallengesforstaffandcustomers;logisticsandbankingsectordisruptions,whichmadeitmoredifficulttowithdrawandmovephysicalcash;andinternetoutages,whichdisruptedinternalmanagementsystemsandmobilemoneyoperations(IFPRI2021).

16.TheclosureofthePactGlobalMicrofinanceFundinJune2023hadasignificantadditionalimpactonoverallMFIactivityinMyanmar.Priortoclosing,thePactGlobalMicrofinanceFund(PGMF)accountedforaroundaquarterofallMFIlendinginMyanmar,playingaleadingroleinprovidingmicroloanstoruralvillagers.PGMFbegancollaboratingwithninelocalNGOsin2013todevelopandexpandmicrofinanceoperationsinremoteareasofthecountry,supportedbyfundingfromtheLivelihoodsandFoodSecurityFund(LIFT).Notably,99percentofitsclientswerewomen,anditslendingsupportednearly1in10householdsacrossMyanmar.ItsclosureinJune2023affectedalmostamillionborrowers,leavingavacuumofmicrofinanceservicesinmanyoftheareasinwhichPGMFpreviouslyoperated

(Box)

.

3,000

2,000

1,000

Figure7:NumberofMFIclients

Figure8:MFIloansandsavingdeposits

Millions

6.5

6.0

5.5

5.0

4.5

4.0

3.5

3.0

Kyatbillions

Jun-18

Dec-18

Jun-19

Dec-19

Jun-20

Dec-20

Jun-21

Dec-21

Jun-22

Dec-22

Jun-23

Dec-23

Jun-18

Dec-18

Jun-19

Dec-19

Jun-20

Dec-20

Jun-21

Dec-21

Jun-22

Dec-22

Jun-23

Dec-23

600

400

200

0

Loansoutstanding(LHS)Savingsdeposits(RHS)

Source:FRDSource:FRD

17.TherehavebeenparticularlysevereimpactsonMFIclientsinconflictaffectedareassuchasSagaingandMagway,wheremicrofinancehastraditionallyhadaprominentrole.InMagwayandSagaing,around18and12percentofthepopulationrespectively(closeto700,000peopleinboth

12

cases)wereMFI