Wave Money plans to adopt Alibaba’s credit analysis technology to roll out new credit scores to Myanmar’s consumers, Nikkei reported on Monday. Yoma Group said that it will integrate the method into Wave Money’s mobile payment app. Wave Money is the leading mobile financial services provider in the country and claims to have access to data and the payment history of over 21 millions customers, or around 38% of Myanmar’s population.
While mobile financial service providers are not allowed to lend under the current license restrictions, Yoma, with a diversified portfolio of businesses in real estate, automotive, and banking, is able to connect consumers and lenders. With the help of artificial intelligence supported by Alibaba, it can gather transaction records of public utility payments from consumers and small business operators through Wave Money’s payment app.
Bank lending in Myanmar has soared since the country started to liberalize its economy in 2011, though low credit access remains one of the challenges that small businesses are facing. From client visits, cash flow estimation, to making the credit decision, lending money is time consuming and a difficult process. “It also requires savings or property as collateral,” Barclay O’Brien, an independent consultant in the microfinance sector told KrASIA.
Although Myanmar is setting up public credit bureaus since 2018, and despite the efforts of private microfinance institutions, many consumers and small businesses still have difficulties accessing credit, and therefore resort to informal lending. In a survey conducted by the Oxford Business Group in 2019, 82% of the CEOs in Myanmar describe access to credit as either “difficult” or “very difficult.”
Among Myanmar’s informal lenders, family and friends are the most common sources for private loans, but microfinance institutions are making inroads in recent years, offering high-risk loans at high interest rates.
“SMEs or small businesses are usually in a quandary when it comes to lending. They are too small for the banks and too big for the microfinance institutions, as they are usually run informally, let alone able to provide collateral,” said O’Brien.
Consumer data from an app can be quite insightful for credit-based decision-making. “It makes access to credit and financial products easier, but it’s also highly dependent on the extent of digitalization of local companies,” said O’Brien.
He believes that easier access to credit and lending could also lead to massive individual over-indebtedness in the future. Like in the case of M-Pesa in Kenya, where easy mobile access created huge debt problems. “Lenders have to make sure that the borrowers can pay back,” he warned.