Afford TWO, Eat ONE Financial Inclusion in Rural Myanmar 1 2 CONTENTS Introduction ...................................................................................................................................................................4 Myanmar: Past & Present ...........................................................................................................................................6 Methodology .................................................................................................................................................................12 Archetypes .....................................................................................................................................................................30 Diversity of the Financial Landscape .......................................................................................................................60 Insights & Findings ..............................................................................................................76 Case Study: Monastery Lending Group ..............................................................................................................90 Case Study: Novitiate Ordination Ceremony .....................................................................................................146 Case Study: The Betel Business .............................................................................................................................168 Looking Ahead ..............................................................................................................................................................180 Glossary ..........................................................................................................................................................................184 What Things Cost .........................................................................................................................................................189 References ......................................................................................................................................................................192 Team & Organisations .................................................................................................................................................198 Colophon ........................................................................................................................................................................202 3 INTRODUCTION Saving, spending and investing money are universal actions. But how and why we make financial choices depend largely on local factors: Government regulations, regional banking operations and technologies and, most importantly, individual needs. Our research team has set out to explore how such influences are driving decisions about money in Myanmar, one of Asia's poorest countries that, until recently, was relatively closed to the outside world. Even today, as Myanmar's economy steadily opens up, many people still struggle to access the formal financial instruments like bank loans and credit cards that many of us take for granted. Afford Two, Eat One aims to explain how Myanmar's poor are formally and informally transacting, saving and investing—and to identify some of the vast opportunities for stimulating local financial activity. Our findings reveal both traditional practices and new trends shaping Myanmar's changing financial landscape, and they offer insights critical for developing future services that address the needs of the poor. Funded by the Institute for Money, Technology and Financial Inclusion at the University of California, Irvine, the team includes designers, analysts, strategists and researchers from Yangon- based Proximity Designs, design strategy consultancy frog, and Studio D Radiodurans. MYANMAR TIMELINE (1947 – 2015) 1947 1948 1958 CONSTITUTION INDEPENDENCE CONSTITUTIONAL MILITARY COUP OF BURMA The country ends 60 years of colonial rule and declares itself Amid widespread political and ethnic conflicts, Prime Burma (today Myanmar) independent from Britain. Minister U Nu is forced to accept an interim period of adopts the 1947 military rule by General Ne Win. constitution in an FIRST CIVILIAN GOVERNMENT CARETAKER GOVERNMENT attempt to develop a Sao Shwe Thaik is elected president and U Nu becomes prime The military-led Caretaker Government holds power parliamentary democracy minister. A bicameral parliament is created and includes the for 18 months before allowing elections that bring in a multi- ethnic state. Chamber of Deputies and Chamber of Nationalities. The post- independence period is marked by successive insurgencies, U Nu back into power. The government’s three key armed conflicts, political strife, and economic instability. (1948 objectives are to restore law and order, eliminate “economic insurgents” and prepare the country for – 1958) civilian elections. (1958 – 1960) UNION BANK OF BURMA Burma begins developing its own banking system by creating the Union Bank of Burma, which takes over central banking functions from the Reserve Bank of India. 4 Over the course of two months, the project team traversed Myanmar, visiting villages, using financial services and interviewing dozens of farmers, traders, and day-labourers—the people who are often excluded from traditional financial markets. By collecting evidence, stories, photographs and other data, we aimed in particular to: • Build a comprehensive understanding of poor people's formal and informal transaction practices.. • Establish a baseline of findings, insights, and frameworks that will guide and inspire future developments in transformational services and concepts. • Identify opportunities for expanding use of and access to financial services and products in under-served and newly opportune areas. As our report shows in depth in the following section (Background & Context), Myanmar is at a defining moment in its history: The economy is expanding, international sanctions are easing, significant investments are pouring in, and land values are increasing dramatically. In some areas, property is more expensive than it is in nearby Singapore. Technology adoption is also sky-rocketing as Myanmar—previously on par with North Korea in terms of mobile adoption ranks—aims to catch up to its neighbours. The cell phone penetration rate is expected to increase by 50 per cent over the next three years, up from just 12 per cent today (Deloitte/Ericsson 2012). High-speed 3G wireless networks now being built will enable access to mobile computing for the first time in Myanmar. The country will have unprecedented choices, options and opportunities around money. This report presents a snapshot of Myanmar's local economic landscape from a qualitative, behavioural and cultural perspective. It profiles a subset of individuals for whom the appropriate formal financial services have not yet materialised, and offers clues about how that might soon change. 1960 1961 1962 ELECTIONS BUDDHISM MADE MILITARY COUP OF MARCH 2 U Nu wins the 1960 parliamentary elections, STATE RELIGION General Ne Win stages a bloodless coup d’état and ousts U Nu. The returning the country to civilian rule. U Nu U Nu’s declaration general establishes a socialist state run by a revolutionary council of received the majority of the Buddhist vote after alienates minority senior military officials. U Nu is arrested, along with anyone else who promising to make Buddhism the state religion. groups and fuels ethnic might question the military rule. Ne Win founds the Burma Socialist insurgencies. Programme Party, now the country’s only legal political party. U NU ADMINISTRATION After the Caretaker Government successfully BURMA SOCIALIST PROGRAMME PARTY (BSPP) PERIOD stabilises ongoing political conflicts, U Nu’s Union Shortly after the coup, Ne Win’s BSPP regime introduces the Burmese party wins a majority of votes in civilian elections. Way to Socialism, an economic development plan that reduced foreign However, the situation does not remain stable for influence and expanded the military’s role. Critics blame the plan for long under U Nu Administration. increasing poverty and isolating the nation. Ne Win’s persecution of (1960 – 1962) non-Burmese residents forced some 200,000 Indians to leave the country. (1962 – 1988) 5 MYANMAR: PAST & PRESENT In the two decades that Proximity Designs has engaged in development in Myanmar, the last two years have been the most hopeful. We’ve seen an unprecedented opening— shaped by President Thein Sein, democracy advocate Aung San Suu Kyi and others—that has transformed the political landscape. Yet despite this progress, Myanmar faces a future fraught with difficult political, economic, and social challenges. Myanmar was governed by military rule for more than 60 years, from its independence from Britain in 1948 through the 2012 elections. The damaging effects are still felt on many levels. Past repression of non-military-affiliated businesses casts a shadow over today’s entrepreneurs. Repeated demonetisation of Myanmar’s currency has eroded trust in the kyat. The 2003 banking crisis and a lack of central regulation still breed tensions between individuals and institutions. Finally, a legacy of foreign hostilities and economic sanctions makes investment and trade feel volatile and risky. As it attempts to shake itself of the past, Myanmar is striving for a triple transition: From the de facto control of a military