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Results from Pacts

Microfinance Projects
in Myanmar
Summary

Data from two surveys and from Pacts ongoing

monitoring systems1 show important socioeconomic advantages for borrowers from Pacts
Myanmar microfinance projects.

Clients have been able to save money, and to

do so above the minimum project-mandated
amounts.

Compared to non-clients in the same village,

clients taking part in USAID-funded MF activities were better able to borrow in times of
financial need, while non-clients were more
likely to sell assets or eat less.

Women respondents in villages where the

microfinance program operates had higher
levels of decision-making authority in their
households.

Microfinance clients are more food secure,

and have greater nutritional variety.

Children in microfinance villages have more

years of education than in non-MF villages

Microfinance activities were able to continue

in the wake of Cyclone Nargis, and four years
later, respondents in villages where MF was
available had better housing, as indicated by
the materials of walls, roofs, and floors.

These results are very encouraging, although

in some cases, the effective size is not large and
there are some data limitations. Additional data
are expected to be available in 2013.

Introduction

contact
Fahmid Karim Bhuiya
Chief Operating Officer

Since 1997, Pact has been implementing microfinance activities in Myanmars Dry Zone, Shan
State, and in the Ayeyarwaddy Delta Region since
2006. Today, with a loan portfolio of $68 million,
these activities comprise the largest microfinance
program in Myanmar and one of the 30 largest in

the world. In 2011, under new legislation allowing

foreign ownership of microfinance institutions,
Pact established a standalone microfinance subsidiary based in Yangon. As of September 2012,
Pact microfinance projects had over 569,000 clients and over 365,000 borrowers in nearly 6,000
villages. Of these, 98% of borrowers are women.
Only the poorer segments of society as assessed
by the communities themselves are eligible to
be clients. These projects are made possible by
generous funding from UNDP, USAID, Danida,
DFID, SIDA, AusAid, the Netherlands Ministry of
Foreign Affairs, New Zealand Ministry of Foreign
Affairs and Trade, EuropeAid and SDC.

Our Approach

Pacts approach aims to alleviate long-term poverty through the development of three essential
resourcesfinancial, institutional and human
capitaland is the foundation of our microfinance
methodology.
To establish the habit of making payments, Pact
requires clients to deposit a small amount of savings on a biweekly basis before taking any loans,
with the option to contribute additional voluntary savings. The MF pays 15% annual interest
on savings and charges 2.5% monthly interest on
loans, while local moneylenders typically charge
5-15% monthly.
MF clients form groups of five members each.
These groups elect leaders and manage their flow
of loans and savings. Approximately 10 groups
make up a village-level center, which also elects
their own leaders. Pact ensures borrowers have

Pact Global Microfinance Fund

+(+951)-501373 pactworld.org
fbhuiya@pactworld.org

Pact is an international, nonprofit organization with forty years of experience. Our vision is a world where those who are poor and
marginalized exercise their voice, build their own solutions, and take ownership over their future.

adequate information to spend their loan funds wisely.

Before taking a loan, prospective borrowers must attend
five modules of business education training, which
orient new and nascent entrepreneurs to key principles
of taking loans and developing or running a successful
business.

(78.2% of responses), while non-clients borrow primarily from family and friends (70.2%) and money lenders
(21.2%). That clients are able to borrow relatively less
from money lenders is of particular note because of the
high interest rates that money lenders charge.

Pact also provides a form of micro-insurance to MF

clients. Each borrower contributes 1% of their loan value
to a Beneficiary Welfare Program. This, combined with
an additional 1% of the MFs gross income, allows Pact to
write off loans of borrowers who face a severe shock (i.e.
crop failure, loss of life) and, in some cases, to provide
cash grants.

Figure 2: Strategies for Coping with

Financial Difficulties (USAID branches)
70%
60%
Client
50%
40%
Non30%
Client
20%
10%
0%

Findings

Savings Regular monitoring of the MF projects shows

that members were successfully able to save. Between

January 2011 and August 2012, MF membership increased from 384,527 to 418,274. Members increased
their savings over that time from an average of 16,290
Kyats to 25,900 Kyats, or from USD 19.15 to USD30.45
(see Figure 1). Notably, savings came not only from the
compulsory savings mandated by group rules, but 15% of
the accumulation came from additional voluntary savings. This suggests that, first, members do not find the
compulsory savings requirements overly burdensome,
and second, that members value saving enough to do so
above and beyond the MF-required level.

Figure 3: Sources of Borrowing (USAID

branches)
100%
80%
60%
40%

Figure 1: Per Person Accumulation of

Savings (MIS data)
Compulsory Savings

20%

Client
NonClient

0%

Voluntary Savings

1,000s of Kyats

30
25
20
15
10
5
0

Prevalence of Borrowing Data from USAID branches

show that 19.9% of non-clients borrow money to cope

with financial problems, while 44.2% of MF clients do so.
In contrast, non-clients are more likely to work harder,
sell assets, or eat less to cope with financial difficulties
(see Figure 2). Having access to credit appears to be an
important financial coping mechanism for clients against
possible shocks.
Of those people who borrow, the source varies depending on whether the person is a client or not (see Figure
3). Clients primarily borrow from a microfinance source

A 2011 UNDP survey collected data on where respondents took non-microfinance loans from, but did not include prevalence of microfinance loans. This means that
it is possible to examine differences in non-microfinance
loan sources, but not overall loan prevalence. In villages
without microfinance programs, 49.8% of respondents
took non-microfinance loans, primarily from moneylenders and friends and family. In microfinance villages,
only 43.1% took non-microfinance loans, a statistically
significant difference (p<.001). These loans came primarily from moneylenders and family members. This
suggests that the existence of microfinance programs
does displace demand for non-microfinance loans.
The differences between the UNDP and USAID branch
data in non-client access to loans may be representative
of regional differences, but might also be representative of differences in the sampling method. The USAID
branch survey includes non-clients and clients in the
same microfinance villages, so self-selection out of the
program may misrepresent the general demand for

credit. In this case, it is likely that the UNDP branch data

represent a truer estimate of borrowing prevalence in a
non-client population.
Womens Empowerment MF female clients have made
significant decision-making gains both at the household
and community level.

At the community level, MF provides women the opportunity for community leadership and financial empowerment. As of June 2012, women from 255 villages
joined the group formation process, practicing local level
leadership and decision making to manage their group
activities; elected 2,944 group leaders and 349 center
chairs; and 84.4% of women who joined the program
had invested in their own income generating activities
deciding on their own investments and business growth.
The UNDP 2011 survey measured womens empowerment through participation in household decision-making. Having decision-making power was defined as
answering that, for key family decisions, either both
husband and wife decide together, that the wife can persuade her husband, or that the wife initiates decisions.
The decisions included sending children to school,
selling crops, and how to manage daily expenses. Not
having decision-making power was defined as always
following the husbands decisions or failing to persuade
the husband on a decision. On all of the family and financial decisions asked about except for daily expenses,
women participating in microfinance programs have a
statistically significant higher degree of decision-making
power (see Table 1). It should be noted, however, that
the plurality of respondents answered for all questions
that both decide, and that the level of self-reported decision-making power is quite high across the board.
Table 1: Percent of women who have household decisionmaking power
NonMicrofinance
microfinance p-value
village
village
Issue
93%
.004
Marriage of children 96%
Sending children to
97%
93%
.000
school
Asset and input
95%
88%
.000
purchases
Selling crops and
95%
89%
.000
selling prices
Donations
97%
95%
.017
Daily expenses
89%
88%
.832

Qualitative findings from a complementary 2011 UNDP

study support the finding of increases in womens empowerment including that women are more confident,
show increased levels of solidarity, are given greater
respect for their opinions, and have a greater vision of
the world.
Food Security Data from respondents in MF villages

show them to be more food secure and have greater

nutritional variety than respondents in non-MF villages

in the UNDP 2011 survey. Food insecurity is defined as
a Yes response to the question, Has your household
not had enough food to feed everyone in a satisfactory
manner? The 2011 survey also measured how many
meals with protein households served yesterday, and the
number of types of vegetables served.
In all categories, respondents in MF villages did better
(see Table 2). For MF village respondents, 25.5% stated
that they were food insecure, while 28.9% of non-MF
village respondents did so. MF village respondents
had more meals with protein, more types of vegetables
served, and fewer months of food shortages.2
Table 2: Food security outcomes by village type (UNDP
branches)
MF
client

Non-MF
client

pvalue

Food insecure

25.5%

28.9%

.048

Number of meals with

protein yesterday

1.43

1.31

.000

Number of types of
vegetables served yesterday

1.39

1.32

.015

Months short of food at last

food shortage

3.53

4.24

.001

The USAID branch areas had a uniformly high degree of

food security (only 5% of respondents, with no difference between clients and non-clients, had changed what
they ate in the past month due to food scarcity or affordability). This is apparently due to regional differences in
food availability.
Education The 2011 UNDP qualitative findings indicate

that educational outcomes improve in microfinance

villages. MF villages have increased awareness of the
importance of education. MF village respondents are
also better able to bear the costs of their childrens
schooling and keep them in school, which means that
children from MF villages are increasingly continuing
their schooling beyond primary school.

The quantitative results from the same study support

this. Both children and adults in microfinance villages
have more years of schooling (see Table 3). It is proba

Table 3: Years of education, by village type (UNDP

branches)
Group
All household members
Respondents only
Non-respondent
household members
Children under 16

MF
Village
5.25

Non-MF
Village
4.82

pvalue
.000

4.44

3.58

.000

5.49

5.16

.000

6.22

5.72

.000

pact

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ble, however, that adult education was preexisting, and

therefore that more educated people are more likely to
take advantage of microfinance.

Endnotes
1.

MF in Disaster-affected areas The Cyclone Nargis hit

Myanmar in May 2008 and caused massive loss of life

and destruction of housing and property. Over 4,000
MF clients died, and 50,000 borrowers lost everything,
including their MF loans and savings. The outstanding
loans lost were valued at over USD 2.9 million.

The UNDP 2011 cross-sectional survey selected a sample of

villages in all three zones (Dry, Delta, and Shan), with controls in
villages not served by the MF. The sample consisted of thirty six
MF and twelve non-MF villages per zone, for a total sample size
of 1,200 per region. All villages sampled were within 12 of the
22 townships where the MF was operating. A previous survey
of UNDP branches was conducted in 2007 without a clustered
comparison group, but data from that survey was not used in
this report.

Pact microfinance activities in the affected areas resumed in early October 2008. As of September 2012, in
the Delta (Nargis-affected) region:

1,478 villages in 332 village tracts, or 90.6% of

pre-Nargis MF villages, had MF activities

20,166 groups in 2,432 centers have formed

117,694 clients are being served

81,046 clients have borrowed 11.18 billion Kyats

93,044 clients saved 1.75 billion Kyats

79.38 billion Kyats have been disbursed, 19.9 billion

Kyats of which were agricultural loans

The USAID data consists of baseline and endline survey data

from 2 branches in the Dry Zone and baseline data from an
additional 3 branches from the Dry and Shan Zones. The data
include 880 respondents: 660 clients and 220 non-clients.
Loan disbursement and collection information was collected
from the MIS database to examine the penetration rate of
borrowing and voluntary savings trends over time.
2.

Because the microfinance villages were not initially randomly

assigned and there is no time series data yet available, there is a
possibility that these positive outcomes for microfinance villages are due to pre-existing differences between villages rather
than program impacts. To explore whether higher food security
is due to differences in initial wealth, a regression analysis was
conducted to control for demographic variables and household
assets that might be associated with differences in wealth and
food security. The relationship between living in a microfinance
village and protein and vegetable consumption remains robust
when controlling for gender, number of stories in the house, age,
electricity, education, and household size.

3.

The sampling methods used in the USAID dataset (see Endnote

1) mean that the control group may represent those who were
less interested in microfinance programs, or the control group
may be benefiting from spillover effects of positive program
impacts. The UNDP data were collected using a better selection
method, but represent only one point in time. Therefore, the
UNDP data may demonstrate pre-existing differences between
the villages rather than program impacts, especially since the
microfinance areas were non-randomly chosen. Differences
between the surveys used for the USAID versus UNDP beneficiaries make it difficult to compare the two datasets.

According to the 2011 UNDP survey, the following differences in housing were found between microfinance and
non-microfinance villages in Nargis-affected townships
(n=600):

9.8% of respondents in MF villages have outer walls

made of brick or wood, whereas 1.3% respondents in
non-MF villages live in this type of dwelling.

7.9% of MF respondents have roofs of galvanized

iron, asbestos, or wood shingles whereas only 0.7%
of non-MF respondents reside in this type of dwelling.

78.7% of MF respondents and only 10.0% of nonMF respondents have floors of concrete or wood.

Conclusion

The data from Pacts MF in Myanmar are quite encouraging

on a number of socioeconomic measures, across all three
datasets currently available. However, the data have limitations that constrain the generalizability of the findings.3
Forthcoming data from a repeat survey of the households
initially surveyed in the USAID branches will enrich analysis of MF impact and deepen the reliability of the data. Future surveys will use lessons learned from both the UNDP
and USAID projects to enhance measurements of outcomes
and impact for the populations served and the analysis of
these and future results will drive improvements to our MF
model and implementation.

Multiple methods were used to collect these data and these

results reflect findings from 3 datasets: a UNDP 2011 cross-sectional impact study with a qualitative component, a USAID panel
study with a 2010 baseline with a planned 2012 follow-up, and
the MIS database.