Myanmar is among the 48 countries included in the LDC (Least Developed Category) list by UN in 2018. However, Myanmar is rich in natural resources and has the advantage of bringing about economic progress by growing its agricultural sector. For any development and economic growth to take place, access to financial services is crucial. Hence, financial inclusion is a factor of growing importance. Myanmar's rural economy barely has access to any formal financial products or services that could contribute to growth in agricultural production. For a long time, for the lower income citizens, the popular sources of credit have been unregulated moneylenders and pawn shops.
The silver lining in the cloud is the smartphone boom in the country. From a mere 10% mobile users' penetration in 2014, the number of users skyrocketed to over 90% in 2018. This also indicates the access to online services which have shot up in the country. However, while citizens have taken to mobile phones, the economy continues to function almost exclusively in cash, mainly due to a lack of trust in the banking system, besides the inaccessibility of services. The challenge for financial institutions is to make use of digital financial services and eliminate cash from its lending operations. Loan officers still spend long hours every day collecting cash instalments from the borrowers, counting the cash several times while also preparing to disburse cash to new customers.
The advances in technology are changing the way people access and use financial products and fintech companies and corporations in Myanmar are cashing in on the country's smartphone boom and Internet access to bring low priced, user-friendly, digital financial products to the people.
Digitization would mean a majority of the population would be added into the financial system formally and given access to regulated, reliable and safe services. The unbanked in Myanmar who are a very financially active lot, depend on unregulated and sometimes unreliable lenders.
Payments is the first step towards digitization as sending money back and forth does not require too much faith and once trust is built with the company, saving and investing will follow.
Once accustomed to using digital financial offerings, people will move on to further services beyond money transfers or phone airtime recharge.
Digital loans when disbursed using a smartphone, can give credit access to low-income clients.
When mobile transactions are made, they create records which can be used to get credit and build up savings for investments. When there is a record of regular payments on time to utilities companies or e-commerce subscriptions, it indicates the consumer's ability to repay loans or build savings.
Using digital financial services will lead to increased household financial security and macroeconomic welfare.
Bulk of the agents who handle mobile money platforms are usually owners of small convenience shops which also take care of basic cash transfers. Going online, these shop owners could become digital loan brokers.
With its unique cultural traditions and social values intact, product and service development in the country is also influenced by it. The monastery lending practice which is still widely prevalent, brings together religious and civic virtues and in the future could become a guarantor for those new to unsecured borrowing.
In the beginning, all new approaches to credit assessment would be based on telecom payment history, but credit rating could be based on online behaviour as well. Agents will need to be trained to go ahead and promote and encourage responsible borrowing and timely repayment.
While it is not easy to predict for certain how the process of digitization will play out, going by past experiences of countries like China where smartphone penetration has spurred mobile payments, it is a very positive sign. Mobile financial services are likely to start growing and take the country towards the goal of complete digitization.
The potential of the new generation who are ready to learn and are highly teachable is encouraging. Moreover, all of the recent changes and innovations prove that Myanmar is ready to enter the modern era of finance.
Digital disruption can be a boon and an opportunity to rethink your business. Your challenge is to create a new business model and value proposition and position your company for long-term success.