Agricultural value chain finance can help drive Myanmar’s agricultural growth

BY SIDDHARTHA BASU, ALAN DE BRAUW, KHIN PWINT OO AND RUSSELL TOTH

Surrounded by some of the largest consumer markets in the world, at the nexus of important trade routes, and with its own growing consumer markets, Myanmar has tremendous potential as an agricultural producer. Yet one persistent obstacle is the agricultural sector’s lack of access to financial services, which can drive productivity and growth.

Myanmar’s financial institutions often shy away from agricultural lending. Agriculture represents about a quarter of the country’s economy and 70% of the population lives in rural areas, yet less than 2% of lending by private commercial banks goes to the sector. The caution is due to a number of factors, including the spatial dispersion of potential borrowers, the need for specific financial product designs, and unique risk management challenges.

While current government lending programs and a rapidly growing array of microfinance services are an important source of finance in rural areas, only a small fraction of these sources support high-growth production activities, such as oilseeds and fisheries.

Photo credit: Asian Development Bank