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Myanmar: Digital making inroads in rural, remittance markets
DIGITAL financial services can ensure that the rural people and workers abroad are not left behind as the banking sector evolves and leaps forward. As it will take a lot of time and resources for the digital structures to grow and for consumers to trust and learn to use the services, the sector needs investments which have a long-term horizon for returns.
Following a national forum in mid-March, Steve Haley, digital financial services (DFS) consultant working with the United Nations Capital Development Fund (UNCDF), talked to The Myanmar Times about the role of digital services in financial inclusion.
“Digital financial services can reduce the cash delivery burden of financial institutions that want to offer products and services to rural people in Myanmar, but they still need to think heavily about the customer engagement and protection,” Mr Haley said.
Apart from the rural population, one group of workers to which digital technology brings vital benefits are those working abroad, whose lives will be much easier with efficient cross-border remittance systems.
“Millions of Myanmar workers in Thailand, Singapore and Malaysia need to send money home. The informal channels are very convenient with quick cash delivery. Providing a formal channel is more secure,” the consultant explained. But the formal channel must be convenient for both the sender and the receiver. It should also allow the receiving end to use the digital money for “something that matters to them”.
The regulations are still under development and “thus far no mobile wallets to my knowledge have had their contracts with cross border remittance providers approved,” Mr Haley went on.
Digital financial services can reduce the cash delivery burden of financial institutions that want to offer products and services to rural people in Myanmar, but they still need to think heavily about the customer engagement and protection. – Steve Haley, DFS consultant
Nay Pyi Taw could step up its support for the sector by introducing an inclusive scheme to enable consumers of different financial institutions to freely send money between licensed providers. This will enable product development and protect consumers.
Likewise, Mark Flaming, chief digital officer at Yoma Bank, stressed how technology can bring the rural population, hitherto left behind in financial reforms, on board.
“Digital technology enables service providers to establish service points and mobile apps that allow people to transact away from branches and ATMs. This is the most important innovation for the rural population because they are remote and far away from branches,” he said.
With the right digital services, farmers and rural residents can manage and transfer their finances even without any physical mobility, according to Mr Flaming.
“It will soon be possible for a rural dweller to sign up for a bank account, do deposits and withdrawals, save money and earn interest, and send and receive remittances, without ever leaving the village.”
It will soon be possible for a rural dweller to sign up for a bank account, do deposits and withdrawals, save money and earn interest, and send and receive remittances, without ever leaving the village. – Mark Flaming, Yoma Bank
For him, the main challenges for digital services to take off in Myanmar are economic. A long-term horizon for returns is necessary for those investments.
“The technology exists, and most banks are only an innovation away from creating the branchless transaction structure. But these structures are costly, and it takes time for people to build trust and learn how to use them,” he said.
In fact, the importance of education is not only related to the digital segment, it is key to the success of the entire financial industry. Mary Miller, access to finance lead at USAID-funded Nathan Associates, earlier argued that Myanmar’s financial literacy still has a long way to go before reaching the level where those running the sector have a sufficient understanding on their jobs. Stakeholders ought to recognise the amount of education, training and experience needed for those who work in banks and regulators.
Yoma Bank rolled out its online signup on March 13 and completed the first digital sign up in the country.
“Watch what comes next, because we will be rolling out new digital services every few months!” Mr Flaming noted.
The bank is currently in discussions with international payment networks and regional remittance companies on cross-border remittances. While network connection is not difficult, the last mile service provider presents the biggest challenge. People who send and receive money need vast networks of cash points to cash in and cash out. Yoma Bank is trying to bridge those last mile providers but they remain in a nascent stage.
He went on to say that the regulatory environment is broadly favourable to digital financial services. But monetary authorities should establish a way to have ongoing discussions with the financial service providers.
“Technology changes so fast that every day there is a new way to sign up customers, send money, and conduct transactions. An ongoing informal exchange between the banks and the regulator will sustain a healthy exchange of information,” Mr Flaming said. This will give the regulator the knowledge and confidence to allow responsible innovation, test it, and then allow it to scale in the market.
Recently, KBZ Bank also started partnering with Huawei to create an inclusive digital financial ecosystem. Mike DeNoma, CEO of KBZ, said while only 10pc of the population have a bank account and only 30pc have access to on-grid electricity, 90pc have a smartphone in Myanmar.
“Our dream, working with all parties, is virtually 100pc financial inclusion through the mobile phone in less than 10 years,” he remarked in Shenzhen.
In mid-March, the National Financial Inclusion Forum in Nay Pyi Taw was organised by the Financial Regulatory Department and supported by the UNCDF and the UK-funded DaNa Facility. Stakeholders discussed about the progress and challenges in the sector.
Financial inclusion is vital for Myanmar’s economic growth as it benefits the country’s diverse communities and ethnic groups and narrows the divide between urban and rural areas. U Maung Maung Win, deputy planning and finance minister, argued there is growing evidence that financial inclusion “directly contributes to poverty reduction” and sustainable livelihoods among the working class and farmers.
Source: https://www.mmtimes.com/news/digital-making-inroads-rural-remittance-markets.html