Savings Save the Day for Myanmar Clients in Pandemic
As a result of COVID-19, businesses and economies around the world are scrambling to survive. Disruptions caused by the pandemic and the policies implemented in Myanmar to mitigate COVID-19’s impact have affected the entire population’s economic activities. Despite tightened cash flow, VisionFund Myanmar (VFM) resumed services that would increase our clients’ access to finance, including offering repayment rescheduling, easier savings withdrawals, and loan disbursements.
Savings, even small amounts, that were set aside during more productive times are now helping people meet emergency needs for funding. As part of taking a loan with VFM, our clients are required to sign up for compulsory savings, which VFM protects for our clients in case of emergencies such as this. This experience highlights the critical importance of savings for access to capital, especially in a protracted emergency.
According to United Nations Capital Development Fund (UNCDF), 94% of adults in Myanmar have no formal savings, leading an estimated 70% of the population to rely on informal finance and saving options. Based on the UNCDF’s case study of Savings Mobilisation in Myanmar, commercial banks and MFIs serve the remaining 6 percent of formal savers. The key reasons for the lack of formal savings are due to small incomes that most banks consider too low to deposit, so there is a poor level of trust towards the banking system. Financial literacy rates can also be low, so helping people to understand the banking system, as VisionFund does, is a key step in ensuring formal savings are made.
In response to the pandemic, VFM removed its 30-day advance notice period for savings withdrawals, to allow for same-day withdrawals by appointment for clients. From April to June 2020, 94,540 clients of VFM have been able to cash out their savings worth a total of 1,818,942,911MMK (equivalent to 1,330,638.50 USD). Compared to May and June last year, VFM saw a 101% increase in numbers of clients withdrawing, and a 209% increase in the withdrawal amount. The increase in savings withdrawals shows that clients are relying on savings to help them meet household needs during this crisis.
According to the survey findings completed by independent researcher 60_Decibels Lean Data Insights, 57% of VFM clients used their savings while 28% have borrowed money from a friend, family, or money lender to cope with COVID-19.
Daw San San Win lives in Lashio with her husband, two sons and one daughter. Her daughter is studying in Grade 10, and her two sons are working as construction workers. Daw San San Win has been a client of VFM for several years and is now on her sixth loan cycle. Her current loan is 600,000 Kyats (equivalent to 400 USD). The family business sells groceries and seasonal fruit. During COVID-19, Daw San San had financial hardships since the family business could not earn enough to cover their daily expenses. “I was grateful to VFM for providing easy access to savings during the pandemic and for helping keep our business running,” she said. “It was very convenient, and I had no difficulties withdrawing money, which was especially important during this difficult time.”
VFM is also in the process of implementing an innovative mobile banking project in partnership with state owned telecommunication company, MPT, to offer clients more secure, convenient and accessible financial solutions, especially in underserved areas. Through the initiative, clients will be able to make financial transactions through mobile agents or digitally through a mobile wallet in addition to accessing VFM services through branch locations.