A snapshot of indebtedness during the COVID-19 crisis in Myanmar
A glance at Debt, Capacity to service pre-existing debt, and How emergency debt is being used differently by MSME-owners and households during the current economic crisis
Background
ONOW’s previous survey found that 60% of households had experienced a work stoppage, and 38% of MSME owners had experienced a business closure. ONOW’s most recent surveying shows a spike in those rates.
From April 12–15, ONOW conducted a second round of digital surveys across Myanmar with our various consumer-focused digital platforms through ubiquitous Facebook Messenger channels. ONOW sought to understand:
- Debt Taken Prior to the Crisis
- Debt Servicing Capacity
- Emergency Debt
2,333 respondents completed the full survey, which has been disaggregated by gender, MSME ownership, urban/rural contexts, and ten urban centers (Hpa An, Kalay, Mandalay, Mawlamyaing, Monywa, Myitkyina, Pathein, Taunggyi, Yangon, Hlaingthayar).
- 56% of respondents were female.
- 36% of respondents operated an MSME.
- 64% of respondents were from urban centers.
The survey is not nationally representative, and survey respondents were conveniently chosen. Survey advertisements were run on social media, inviting Facebook users to click in to view instructions for how to stay safe during the COVID crisis and to contribute information about their present economic situation. As a result, there is likely a skew toward youth and high connectivity. There may be bias toward those who have experienced negative job effects.
As in past surveys, the digital survey was followed by COVID-19 health information from official MoHS sources, and short term coaching guidance for households and MSMEs to navigate cash shortages.
Key Findings
The data below will demonstrate:
- A very large percentage of households and MSMEs are having difficulty servicing debt taken on before the crisis. 84% expect to have difficulty with their next loan payment.
- Among those taking Emergency Debt, a startling number are using that debt on survival goods. 35% of respondents report using this new debt on Food and Health purchases.
- MSME-owners demonstrate slightly better resilience to shock than Non-owner households, but in many areas shuttered businesses are suffering. Households report using Emergency Loans at 15% higher rates than MSME owners. 6% fewer MSME owners expect to have difficulty with their next loan payment.
The situation could become increasingly dire if financial institutions are unable to extend credit in the coming weeks, as households will increasingly be forced to turn to more expensive forms of debt to meet basic household needs.
Employment Disruptions and Job Searches
The graphic below demonstrates trends in work stoppage. 70% of household respondents report stopping work. 49% of MSME Owners report shuttering their enterprise.
61% of MSME Owners responded that they are looking for work, while 72% of Non-owners report looking for work.
Existing Debt
The graphic below shows reported levels of debt that pre-existed the current economic crisis. 39% of respondents overall indicated holding debt prior to the crisis. MSME Owners reported holding debt at levels 5% higher than Non-Owners.
The graphic below demonstrates from whom the pre-existing debt was borrowed. Friends provided loans to the highest share of respondents, at rates of 35%. Banks and Family were reported at the lowest levels. Moneylenders provided credit to 20% of all respondents.
MSMEs reported a lower share of loans taken from MFIs, Friends and Moneylenders than was reported by Non-owners. MSMEs borrowed at higher levels from Families and Banks.
Servicing the Debt
The graphic below demonstrates the current difficulties faced by borrowers in servicing their debt taken on before the crisis. 84% of borrowing respondents said they are experiencing difficulty making their payments on time.
64% of respondents believe they will be late on their next payment, but will be able to service the debt. 20% indicated they expect to have difficulty paying the next several payments. Only 16% said they will have no problem making payments.
20% of MSMEs believe they will have no difficulty making their next payment, a rate that is 6% higher than that reported by Non-owners.
Emergency Credit
Respondents were asked if they have taken on new debt during the current economic crisis. 25% of respondents overall report they have taken on new debt. MSMEs owners have taken on debt at 3% lower rates than Non-owners.
The graphic below demonstrates for what purpose Emergency Debt was taken on my MSMEs and Non-owners.
23% of all respondents indicated that they took emergency debt for the purchase of Food. Among Non-owners, this rate was at 28%, while for MSME-owners, only 13% took emergency loans for Food.
26% of MSME-owners took on emergency debt for their Business.
13% of respondents overall report taking on emergency debt to make a loan payment.
Debt Spirals: Taking On Additional Debt
The analysis below examines those who reported taking on Emergency Debt while already holding debt taken on prior to the current economic crisis. The data has been disaggregated by MSME Owners and Non-owners.
Among MSME Owners overall, 37% have taken on Emergency Debt. In the group of those indicating they will be late on their next loan payment, 40% have taken on additional debt. Among those responding that they will have difficulty with their next several payments, 43% have taken on Emergency Debt. Among those who believe they will have no difficulty making their future payments, 21% reported taking on Emergency Debt.
The graphic below looks at Non-owners. Overall, 40% have taken on Emergency Debt. In the group of those indicating they will be late on their next loan payment, 40% have taken on additional debt. Among those responding that they will have difficulty with their next several payments, 51% have taken on Emergency Debt. Among those who believe they will have no difficulty making their future payments, 24% reported taking on Emergency Debt.
Dynamics in Work Stoppage, Servicing Debts and Emergency Borrowing — MSME Owners and Non-owners
The graphics below show the relationship between work stoppage and ability to service debt that was taken on prior to the current crisis.
Among MSME-owners, 71% of those who have shuttered their business are concerned they will be late on their next payment, or 7% above the overall rate of 64%.
Shuttered MSMEs expect to have difficulty with the next several payments at a rate of 18%, or 2% below the overall average of 20%.
11% expect to have no difficulty with payments. This rate is 18% below the rate of those MSMEs who have not shuttered, and 5% below the overall rate reported
Among MSME Non-owners, 65% of those who have lost employment are concerned they will be late on their next payment, or 6% below those MSMEs who report being shuttered.
However, households who have lost their jobs expect to have difficulty with the next several payments at a rate of 25%, or 7% above shuttered MSME-owners, and 5% above the overall reported rate of 20%.
Only 10% expect to have no difficulty with payments. This rate is 13% below those households who have not lost their jobs, 19% below the rate of those MSMEs who have not shuttered, and 6% below the overall rate reported of 16%.
Work Stoppage and Emergency Debt
The following graphics demonstrate the relationship between Work Stoppage and Emergency Debt.
Among MSME-owners, those who have not experienced a business closure have taken Emergency Debt at the rate of 21%, or 4% below the overall average of 25%. MSMEs who have shuttered report taking Emergency Debt at the same rate as the overall average.
Among Non-owners, those who have not experienced a job loss have taken Emergency Debt at the rate of 23%, or 2% below the overall average of 25%. Non-owners who have lost employment report taking Emergency Debt at the rate of 28%, or 3% higher than the overall average of 25%.
Work Stoppage and Emergency Debt Purpose
The graphics below show the relationship between Work Stoppage and Emergency Debt Purpose, disaggregated by MSME and Non-owners.
MSME owners who experience a business closure used Emergency Loans at higher rates for Food and Medical Expenses. 27% of MSME-owners experiencing a closure used the Emergency Loan for the Business.
Only 4% of MSME owners who have not shuttered report using Emergency Loans for Food, 19% lower than the overall rate of 23%. MSME owners with a shuttered business used the Emergency Loan on Food in 17% of respondents, or 6% below the overall rate.
24% of MSME owners who did not close their business used an Emergency Loan to make a Loan Payment. This is 11% above the overall rate of 13%, and 13% above the rate at which MSME-owners who closed their business report doing so. 28% of MSME owners used the Emergency Loan on their business, a rate that is twice as high as the overall share.
Among households without an MSME, Non-owners used an emergency loan 28% of the time for food, in instances of both No Work Stoppage and Work Stoppage. These rates are 11% higher than MSME-owners who shuttered, and 24% higher than MSMEs who remain open.
15% of households who did not experience lost employment reported using Emergency Loans for Medical, a rate that is 4% higher than the overall share, and 11% higher than MSMEs who did not close.
Recommendations
The data above shows that households and MSMEs are having difficulty servicing debt from before the crisis. Emergency Debt is being used on survival goods and staples, demonstrating a likely reduction in incomes. MSME-owners demonstrate slightly better resilience to shock than Non-owner households, but in many areas shuttered businesses are suffering. This indicates continued investment into MSME development is must to increase community resilience.
Though delinquencies are likely to increase sharply, financial institutions must be immediately supported to inject credit into communities. An effort to support the informal MSME sector must be considered to bolster the resilience of enterprises who have not yes closed.
Who is ONOW?
ONOW enables female migrants in Myanmar to become empowered entrepreneurs who are financially capable. ONOW’s business incubator helps a woman
- connect to formal financial systems,
- become digitally literate,
- validate her business idea,
- find startup capital, and
- launch the business.
ONOW coaches these businesses for up to two years through individualized coaching and problem solving. Since 2012, ONOW has helped nearly 500 people launch enterprises, and has coached more than 1,500 households. ONOW’s digital platforms have reached more than 200,000 users, and has connected nearly 30,000 to their first formal financial accounts.
ONOW is a member of the Aspen Network of Development Entrepreneurs, and a participant in the Miller Center GSBI Social Entrepreneurship at the Margins.
If your organization would like to use our services for targeted rapid economic surveying throughout Myanmar, please do not hesitate to reach out to ONOW at our website.
