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UK says microfinance key to Burma’s growth

Britain will commit a sizeable portion of its aid to Burma over the next four years towards spurring microfinance initiatives in the country’s rural regions, where the absence of credit has fuelled endemic poverty.

Expansion of the sector has been targeted as a key priority of both foreign donors and the Burmese government, which enacted a microfinance law late last year that grants a greater number of organisations permission to kick-start schemes. The decision is expected to be made official today following British Foreign Secretary William Hague’s visit to Burma.

“One of main obstacles to growth in rural areas [in Burma] is the lack of credit,” Paul Whittingham, head of the UK’s Department for International Development (DFID) office in Rangoon, told DVB.

“There has been a lot of attention focused on this issue – when [economist Professor Joseph] Stiglitz arrived in 2009, while the IMF also identified it. There is also consensus among Burmese, including Aung San Suu Kyi and the government, that this is an area where quick investment can have a quick impact.”

Burma was ranked 149 out of 187 countries in last year’s Human Development Index, the lowest among Asia-Pacific states. Since the enactment of western sanctions in the mid 1990s, it has also received less aid than any country in Southeast Asia. But a shift is underway among donor countries, particularly in the EU, to change that.

The UK last year committed £185 million ($US290 million) in aid to Burma over a four-year period, making it the largest bilateral donor to the country. With Burmese highly distrustful of the country’s corrupt and inefficient banking system, the normal route to obtaining credit, Britain thinks  the allocation of £10 million to establish microfinance schemes in the border regions will see quick improvements.

Poverty levels in the country’s rural regions, particularly in Karen state in the east, far surpass those of inland urban populations. The peripheral populated by ethnic minority groups, many of which have been beset by decades of conflict, have long been neglected by the government, with infrastructure such as roads left poorly maintained, and schools and hospitals woefully undernourished.

Part of the reason for Burma receiving scant aid over the past decade has been rampant corruption among officials, which gained notoriety after it emerged that large sums of money destined for victims of Cyclone Nargis in 2008 were siphoned into the pockets of government authorities.

That remains a concern, Whittingham says, but the Nargis debacle prompted the British government to bolster safeguards over aid being channelled into the country. “We have very strict firewalls and remain very vigilant about where the money is going – we can track very closely where each pound of our aid ends up.”

The environment for foreign aid workers has also improved from a time when heavy restrictions were placed on their movement, he says. Non-governmental organisations have expanded in number and are now able to hold capacity-building workshops for Burmese.

But problems over access to conflict zones remains a key area of concern, particularly in northern Kachin state where the government has largely blocked aid workers from visiting the majority of the 50,000 refugees who have fled fighting since June last year.

“Access is still not as good as it needs to be,” says Whittingham. “It’s absolutely critical that all sides of conflict abide by humanitarian principles, which include neutrality of aid and full access [for aid workers] to all sides and citizens of this conflict.”

Hague yesterday called on the government to allow “unfettered humanitarian access” to the Kachin, who are among more than half a million people displaced by conflict in Burma’s border regions.


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