Rural Financial Institutions in Myanmar: A Comparative Study of a State-Owned Bank and an International NGO

Abstract

This article uses data from field surveys to examine the features of major financial institutions in rural Myanmar and discusses how to improve the situation. The data were mainly collected from field interviews with rural households and the staff of financial institutions in Myanmar. Two financial institutions are analyzed in detail, a state-owned agricultural bank (Myanmar Agricultural Development Bank; MADB) and an international NGO which is supported by UNDP (the United Nations Development Program). The study reveals that the general size of most MADB loans in relatively small and that the number of MADB clients declined sharply during 1997 and 2002, while the size of NGO loans and the number of their clients have rapidly increased since 1997. The paper argues, first, the stagnation of MADB performance can be explained by the active regulations and rules related to the bank and the banking sector. It then presents the manner in which the NGO is able to increase loan disbursement despite various constraints. In particular, the results show that it is rational for the NGO to charge slightly higher interest rates to borrowers and increase income from the interest in order to promote loan disbursing against the fund resource constraint. In addition, some implications are discussed detailing ways in which the MADB and the NGO can promote credit supply in rural Myanmar.