Myanmar Financial Diaries: Managing cash flows near the Sacred Mountain
A farming household managed by an older woman is typical of farming households who depend for a large part of their income on the sale of crops grown on their own land: incomes and expenditures are ‘lumpy’ compared to those of non-farming families, or of farming families who mostly labor on other people’s land.
Mrs. DK’s household consists of 5 adults, all unmarried. They are Mrs. DK herself (60), her elderly and almost bedridden mother, her two sisters and a brother. Mrs. DK is articulate and healthy and reasonably well-educated (to 10th grade) and clearly the manager of the household. They live in a farming village at the foot of a sacred mountain just off the road from Mandalay to Kyauk-Sel. Their home is one of the bigger houses in the village, built of solid timber with woven bamboo panels and ceilings and a tin roof. It has an airy feel and is in a pleasant setting with a work yard to the front. They have six acres of farmland on which they grow onions, lentils and rice. They have two oxen and three cows, a motorbike and a bullock cart, but no phone.
The household is mostly monetized: they sell their crops other than their rice crop, which they consume. There is usually enough of it to feed the family throughout the year. The brother does most of the farming on their own land, with help from the two sisters who also sometimes labor for other farmers, earning Ks. 2,500 daily when they do so (at the time of the study Ks. 1,000 = US$1).
Cash flow management
Mrs. DK manages the house and its affairs including its money and finances. She also does most of the shopping for the home and for the farm business.
During the period of the study, crop income flowed in lumps: Ks. 297,000 earned from onion sales in week 33 (of our 52 week study beginning in July 2014 and ending in July 2015) and lesser amounts in weeks 24 and 28. The labor income came in much more steadily, in transfers to Mrs. DK from her siblings. Mrs. DK then managed two types of spending – on the household and on the farming business, with the latter far more ‘lumpy’ than the former.
Savings and loans
These lumpy income and expenditure patterns required financial tools to reconcile them. Mrs. DK borrowed just over Ks. 1.4 million in loans from formal banks at the start and at the end of the year. There were strong relationships between getting a loan and business spending and between crop income and loan repayment. In weeks 7 and 8 she borrowed a combined total of Ks. 500,000 and in week 8 spent over Ks. 130,000 on farm inputs. In week 33 she earned Ks. 297,000 from the sale of onions and made a Ks. 300,000 loan repayment. Home savings were also related to investments and to loan management: in week 41 Mrs. DK dipped into her home savings to invest in the farm, and on the following week dipped in again, this time to repay loans. At the close of the year she stored two big loans in home savings, since they were not yet ready to spend the loans on farm inputs.
The loans were from formal financial institutions, including the government Agricultural Development Bank, and a farm inputs supplier. The first offers low-interest loans for a six-month term with a balloon repayment and with the loan amount capped by the borrower’s registered land holdings. The second offers a shorter-term loan (four months) and charges more interest, but also takes balloon repayments. In the past, Mrs. DK has also borrowed from the co-operative bank.
The kind of financial management that Mrs. DK carries out is complex. For example, holding too much cash at home is unwise, in her view, because of the temptation to spend, so she regularly turns surpluses into gold ornaments. They can then be pawned if cash is needed quickly, for example, to repay a loan in the absence of crop income. The alternatives would be to sell large assets, such as their land or oxen or, in extreme cases, to go to a private moneylender.
About the Myanmar Financial Diaries
The UNCDF MicroLead programme funded by Livelihoods and Food Security Trust Fund (LIFT) in Myanmar aims to contribute to the development of a strong, inclusive financial sector in Myanmar. UNCDF commissioned Microfinance Opportunities and TNS Myanmar to conduct a year-long Financial Diaries research study to provide in-depth market intelligence on the economic behavior of low-income residents of Myanmar. The study covered 101 women and 10 men living in urban, peri-urban, and rural areas of the Mandalay Region. The Diaries gathered information each week between August 2014 and July 2015 on the respondents’: purchases, sales, earnings, loans (including store credit), loan repayments, savings deposits and withdrawals, and transfers of money both within the household and outside of the household. The respondents also reported on any unusual events that occurred each week.