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Finance

Too much, too soon?: Myanmar and Western investment

As Myanmar is increasingly brought back into the international fold, foreign investment is increasingly flooding into the country. While the funding helps to nourish a developing economy, some warn it may be excessive.

Thuzar Nwe sits on the floor of young mother Khin Cho Sett's living room, going through all the points of her questionnaire one by one.

Cho Sett sells fried pork fat on the street - a popular snack in Myanmar - and needs some money to invest in her small business.

As a financial advisor for the NGO Minggalar Myanmar, Nwe gives out microloans to small entrepreneurs. Most of the women here are street vendors.

Clients take out loans of up to 50,000 kyat (45 euros, 60 US dollars) at an interest rate of about 2.5 percent. The period varies from 3 to 6 months and customers build up a form of credit rating.

Myanmar currency being exchanged (Photo by Paula Bronstein/Getty Images)

Customers can borrow the equivalent of 60 US dollars for their immediate business needs

"Every week they come here to pay back the installments," said Nwe. "Once they've repaid the loan, they can take out a new, higher loan."

Saving a new concept

In addition to repaying the loan, the customers have to save a small amount each week. In Myanmar, where there is often little in the way of spare income, saving money is something of a new concept to many.

The project is being supported by the Savings Banks Foundation for international Cooperation. The German NGO helps with planning and supervising the project. This co-operation was only made possible by the political reforms in Myanmar, with a microfinance law passed in November 2011.

Since the political reforms, the Myanmar has been ranking high on the priority list of international NGOs, a development observed by Birke Herzbruch, from the German aid organization Malteser International.

At the moment it's primarily the classic NGOs from Europe, the US or Australia who are trying to get a foot on the ground in Myanmar," said Herzbruch." That is important because the need is immense, especially in rural areas but increasingly also in cities. NGOs can really make a big difference here."

Danger of economic imbalance

Since her release from house arrest, Myanmar’s opposition leader Aung San Suu Kyi has been pragmatic in trying to bring investment to the country.

Myanmar opposition leader Aung San Suu Kyi delivers a speech (AP Photo/Yoshikazu Tsuno, Pool)

Suu Kyi has been pragmatic in trying to attract greater investment to the country

NGOs bring money with them and the non-profit-sector could soon be one of the biggest sources of foreign currency in Myanmar. But Dr. Wang Yit Fang, country advisor for Myanmar with the multinational business group Jardines, warns this could result in a lopsided economy with an unhealthy dependency on aid money.

"There are so many foreign NGO-companies coming in that I think it's going to have a huge impact on the economy. NGO money, if it comes in too big a wave, or too soon, draws away human resources which are usually very scarce in a developing country like Myanmar. It draws the best talent into the sector where the money is flowing to."

However, Cho Sett hopes that the foreign funding will kick-start the economy and help her to sell more fried pork fat. The more money is in other people's pocket - the more her little business will thrive as well.

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