By Lory Camba Opem and Ricardo Garcia Tafur
IFC’s mission is to support effective, responsible, inclusive financial intermediaries and leverage them to meet development impact and financial sustainability goals. Myanmar is one of the top 25 priority countries in the World Bank Group’s Universal Financial Access initiative to expand access to one billion of the world’s unbanked by 2020. For Myanmar, this goal entails increasing financial inclusion from 30 percent in 2014 to 70 percent by 2020. Advancing responsible finance is a cornerstone to ensuring that people have sustainable and affordable means to manage their financial lives. As such, IFC has played a proactive role in promoting responsible finance globally through knowledge sharing initiatives such as the G20/Global Partnership for Financial Inclusion, and the Responsible Finance Forum. IFC also supports microfinance institutions committed ongoing efforts to implement the Smart Campaign’s Client Protection Principles.
Responsible microfinance is a core value-add and manages risks
Responsible microfinance is a core value-add that implements essential business practices to protect clients and builds their confidence when using microfinance products and services. Maintaining customer trust is ultimately critical, for it enhances credit and operational risk management. Customer trust further empowers lower income people, in particular the rural poor to make better financial decisions. Microfinance institutions empower their clients when they increase financial awareness through: transparent pricing, disclosure of terms and conditions in local/simple language, offering the right products based on clients’ needs; providing customer services for resolving complaints and preventing over-indebtedness. This is a dynamic relationship that can be mutually reinforced between these clients and their microfinance providers, for example: understanding customer needs informs product design and rollout that can be integrated in risk management frameworks. This ongoing process builds client loyalty and institutional resiliency; as well as longer term stability of the microfinance sector.
Myanmar’s path to responsible financial inclusion
Myanmar is well positioned to harness global best practices and strategically avoid crises of confidence, which befell the global microfinance industry over the last decade –in Bolivia, India, Nicaragua, among others. Myanmar’s relatively nascent microfinance sector allows it to create a more resilient path for itself and particularly for 70% of its rural poor and underserved without access to formal financial services. Having expanded to over 200 microfinance institutions since microfinance legislation was passed in 2012, Myanmar has demonstrated it is a dynamic sector. Yet capturing the opportunities that microfinance brings will require a comprehensive understanding of potential risks to its clients, for the institutions themselves and the broader financial sector. The evolving digital finance landscape further introduces a more competitive environment. Myanmar’s microfinance regulations reflect the relevance of responsible finance, particularly in the Notifications on Consumer Protection by the Microfinance Business Supervisory Committee. The client protection principles resonate, as it focusses on: preventing over-indebtedness, responsible pricing, fair and respectable treatment of clients and data privacy. How to pragmatically implement these principles in practice will require persistent focus as the microfinance sector matures, and a commitment at the top by microfinance institutions and their leadership.
IFC’s Responsible Microfinance Training series
Due to the current context of Myanmar Microfinance sector, Responsible Finance will be one of the most relevant topics. In October 16, 2017, IFC, in collaboration with the Myanmar Microfinance Association, launched a monthly training series over the next 6 months to build capacity for responsible business practices and promote financial consumer protection through knowledge sharing activities with regulators and industry players. The training series further reinforces IFC’s earlier advisory initiatives in Myanmar to enhance institutional capacities and mitigate lending risks at the industry level. It also adds to IFC efforts on building the financial infrastructure in Myanmar, which has involved supporting the development of a central credit bureau expected to be launched later this year following the issuance of a landmark IFC-supported credit reporting regulation in March 2017. IFC’s advisory training initiative is in line with IFC’s recent investment financing package of $13.5 million to local microfinance institutions to help meet Myanmar’s critical credit needs and unlock the country’s economic potential of the rural sector and small enterprises.
Targeting development results
IFC’s ongoing investments and advisory work are helping to provide much needed financing to increase productivity and create jobs, incomes and prosperity for a significant number of low income people in the country. To complement these efforts, the responsible finance advisory training program in Myanmar will enable IFC to further improve client protection, financial education and transparency in lending policies for MFIs in Myanmar, which are ultimately serving thousands of micro enterprises, lower income households and women in rural and urban areas. These clients will benefit from more appropriate products and services that meet their needs, coupled with responsible finance practices that seek to ensure adequate consumer protection.
IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, we use our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In FY16, we delivered a record $19 billion in long-term financing for developing countries, leveraging the power of the private sector to help end poverty and boost shared prosperity. For more information, visit www.ifc.org