Executive Summary
Recent years have witnessed increased financial inclusion in Rakhine State and more broadly across Myanmar, yet the events of 2020 and 2021 have demonstrated the great risk that such gains could be halted or even reversed. With each passing year, more businesses and households in Rakhine State have turned to banks, microfinance institutions and other formal financial services providers for improved economic security, however this trend may soon change. The compounding effects of a global health pandemic, longstanding conflict, periodic environmental disasters and an evolving political and economic crisis have placed extraordinary strain on homes and businesses nationwide. In Rakhine State, business closures during the second wave of COVID-19 and whiplash from events elsewhere in the country have led to reduced income and increased financial insecurity for many. Although political tensions in the state perhaps diminished in late-2020, they remain an unresolved issue and ever-present risk to political and economic stability. Meanwhile, midway through 2021, Myanmar’s unpredictable political environment and worsening COVID-19 crisis continues to add greater urgency to the challenges faced by households and businesses in Rakhine State.
This study seeks to assess the effects of the first two waves of the COVID-19 pandemic on borrowers in Rakhine State at the start of 2021, just prior to the events of February 1. The study aims to better understand the business conditions, recent experiences and economic outlook of recipients of business-related microfinance loans in the course of 2020. The study is based on 1,430 interviews with current and formers clients of VisionFund Myanmar’s (VFM) business-lending programs in four Central and Northern Rakhine State townships: Mrauk U, Kyaukphyu, Kyauktaw and Sittwe. The study population consists primarily of owners of microenterprises, all of whom have received loans from VFM to support their livelihood activities. The study is based primarily on four samples of current or former group borrowers from each of the four separate townships. In Sittwe Township, the study also includes one additional sample of group borrowers in restricted villages (i.e., Muslim communities with formal and informal constraints on entry and exit) and one sample of individual borrowers in unrestricted villages. The data was collected primarily during January 2021.