Financial Inclusion Myanmar

With 70% Unbanked Population, Myanmar Bets on Fintech to Improve Financial Inclusion

Despite the Myanmar government’s push to expand access to financial services, the country still trails far behind the rest of Asia in rates of participation in formal financial services, financial literacy, savings rates and the use of digital financial services, according to a new report by social enterprise ONOW Myanmar. But fintech and mobile technology promise to greatly improve financial inclusion.

Financial inclusion is still very low in Myanmar with only 6% of adults using more than one financial product. Products and services are not fully meeting the needs of the population, and limited infrastructure is constraining business model and product offerings, in particular for rural areas, ONOW says in a report titled Capabilities in Digital Financial Services: Calming the Fears of Myanmar’s Unbanked.

How Myanmar is pushing for financial inclusion

To support financial inclusion, the Myanmar Ministry of Planning and Finance, in partnership with UK-funded DaNa Facility, and the United Nations Capital Development Fund (UNCDF) Myanmar, has set out ambitious goals through its Financial Inclusion Roadmap, a strategy referred to as Making Access Possible (MAP).

Among other goals, Myanmar aims to increase financial inclusion from 30% in 2014 to 40% by 2020, and adults with more than one product from 6% to 15%, by supporting the development of a full range of affordable, quality and effective financial services.

Since the plan was launched in 2013, Myanmar has seen a significant increase in financial access. A report released in 2018 as part of the MAP program found that adults with access to at least one formal financial product increased from 30% in 2013 to 48% in 2018, an almost two thirds increase in financial inclusion, surpassing the initial 2020 target of 40%.

Additionally, initiatives such as Fintech Challenge Myanmar, an innovation program by DaNa Facility, UNCDF and the Asian Development Bank’s ADBVentures, have emerged in recent months to spur innovation in financial services to promote greater financial inclusion.

Announced in May this year, Fintech Challenge Myanmar was developed in close cooperation with the Central Bank of Myanmar (CBM) and the Financial Regulatory Department (FRD) of the Ministry of Planning and Finance.

An emerging fintech landscape

Several factors have contributed to rising financial inclusion in Myanmar including growing Internet and mobile phone penetration, with the mobile phone connectivity rate grew from less than 10% in 2014 to 95% in 2019, according to the US International Trade Administration, as well as the emergence of better alternatives to informal providers and digital tools.

Today, Myanmar is experiencing significant technology-led changes in its banking and finance sector, with people gradually moving away from cash towards saving money in banks and using payment cards, such as ATM cards and Myanmar Payment Union (MPU) cards. MPU is the national payment network.

Additionally, the proliferation of mobile phones and Internet access is giving people access to digital financial services via mobile technology such as mobile applications and web platforms.

Wave Money, a joint venture company between Norway’s Telenor, Yoma Bank and First Myanmar Investments, allows users to transfer money quickly, safely and conveniently throughout Myanmar. Funds can be collected at any of the 52,000+ Wave shops across the country in both urban and rural areas.

Wave Money was the first mobile financial services operator to be granted a Mobile Financial Services (MFS) license by the Myanmar central bank. The regulation, issued in 2016, allows licensed companies to provide electronic money transfer and other tech-based financial services within the country.

In addition to ventures like Wave Money, several players from neighboring countries including Singapore and Thailand have also made inroads in Myanmar’s fintech sector, forming partnerships with local companies to tap into the market.

In 2015, Singapore payments services provider 2C2P partnered with MPU to develop and deploy the first e-commerce payments platform to directly settle payment for online purchases.

In 2017, Thai fintech company T2P signed a joint venture deal with City Mart, a leading Myanmar retail chain, to launch an e-wallet service that would enable online shopping and self-check-outs.

Most recently, news broke that a collaboration between Krungthai Bank and EVX Holdings from Thailand, and Shwe Rural and Urban Development Bank from Myanmar, is set to introduce the first cross-border blockchain powered money transfer services between Thailand and Myanmar.

The new service – to be called Krungthai Bank and Shwe Bank Remittance powered by Everex – will be designed to combat two key issues Myanmar migrant workers in Thailand currently face: high remittance costs and a lack of trust.

Challenges remain

Despite the numerous fintech initiatives from both the public and private sectors, Myanmar still lags behind its Asian counterparts in terms of financial inclusion, with only 20% of the population having a bank account, the ONOW report says.

According to the report, the barriers of digital literacy, financial capabilities, and the gap in gender access are standing in the way of full inclusion and financial health, and a lot of education and training still needs to be done.

To help with these issues, ONOW says it has built Build3, a digital platform aimed at bringing digital financial services to the Myanmar population.

Build3 is a financial institution-facing platform, which combines algorithm, user segmentation and behavior-driven financial education to seamlessly connect consumers to financial institutions in a completely digital interface.

The company recently completed a six-month pilot program which saw the platform generate 25,000 capable leads for financial institutions from a user base of 166,000 users. 52% of users were women, and 90% of users had never made a purchase online, ONOW says.