Myanmar trials blockchain technology for microfinance

Rage Review : The demand for microfinance in Myanmar, a developing country, is four times the supply. To fill this gap, Myanmar's microfinance institutions have received technical support. Infoteria Corporation and the Tech Bureau Corporation of Japan have collaborated with BC Finance Holdings Limited to test the Mijin platform based on the Technology Bureau, and successfully implemented the transfer of loans and deposit account data in the main system of Myanmar BC Holdings Limited. The regulatory system of developed countries may affect technological innovation, so developing countries are more suitable for the development of blockchain start-ups. Developing countries will implement blockchain technology faster than other countries, and can even compete with developed countries.

Translation: Nicole

Developing countries present huge development opportunities that mask the problems of underserved populations. Myanmar is an emerging economy where providing banking services to people who are neglected by the mainstream economy can bring significant benefits.

In neighboring Bangladesh, microfinance has been a huge success, with nearly 700 microfinance institutions in operation, disbursing $647 billion in taka to nearly 34 million active borrowers, according to the Copenhagen Consensus think tank.

Myanmar is an emerging fintech environment

According to the Consultative Group to Assist the Poor (CGAP), the demand for microfinance in Myanmar is currently four times the supply, which is one of the reasons why Myanmar is finding it increasingly difficult to develop. Therefore, Myanmar's microfinance institutions have received technical support, etc.

Recently, Infoteria Corporation and the Tech Bureau Corporation of Japan have partnered with BC Finance Holdings Limited to test the Mijin platform based on Tech Bureau’s Mijin, a private blockchain using ASTERIA WARP and the Mijin Adapter on Microsoft Azure.

By using this technology, Infoteria and Techbureau successfully implemented the transfer of loan and deposit account data in the main system of Myanmar BC Holdings Co., Ltd. The experimental demonstration was carried out from May 28 to June 5, 2016.

The experiment was very successful, as Infoteria and Techbureau were able to record all transaction history of one of the 19 branches of BC Holdings Limited on the private blockchain Mijin.

We spoke to Jeremy Kloiser-Jones, founder and CEO of BC Holdings Ltd., about the successful testing of blockchain technology in a microfinance setting.

Eremy Kloiser-Jones

He said:

“The test featured an internal application of blockchain technology running on our core banking system. All indications are that the test went very well. Naturally, we look forward to Mijin supporting a new core banking system. We are happy to provide input from our users and help with its development. In the meantime, we plan to use blockchain elsewhere, either as a foundation or as a component of a variety of services - one of which will be announced in the coming weeks. We are focusing on practical applications.”

Developing markets can benefit from fintech

Even in Myanmar, the fintech environment is very restricted now. However, as Myanmar begins to embrace openness, everything becomes possible.

The penetration rate of mobile phones has increased from 10% four years ago to 50% now. Mobile phones are an important transmission channel for microfinance companies.

Jeremy Kloiser-Jones of BC Finance said Myanmar’s economy is now growing at 8.5% per year, so there is a lot of demand for many things.

The High-Tech Bureau platform is used in BC Finance, which has its own presentation and potential fintech applications in developing countries. Takao Asayama , CEO of the High-Tech Bureau, believes that most developing countries, including Myanmar, are still running businesses with traditional technologies. He cited the example of BC Finance: using Excel spreadsheets to manage loans and then putting them into daily databases. He believes that upgrading to an enterprise-level financial system will cost millions of dollars and require reliable overseas system integrators.

By using blockchain technology, things can be made relatively simple.

Takao Asayama

Asayama said:

"However, they can use blockchain technology to build a ledger system that processes all transactions with digital signatures, and the data cannot be manipulated. Blockchain will solve the problems in developing countries and easily reduce costs by 1/10 or 1/100. Similarly, micro-loans are a collection of small transactions, which would be a very large expense using the current banking system. Blockchain can effectively reduce these costs and bring a better user experience to micro-credit."

This may be easier to do in developing countries.

Developed countries may have a more favorable environment for innovation, but in some cases, the current regulatory system makes things difficult. In this way, fintech companies prefer developing countries.

Asayama explained:

“Usually, these developing countries face fewer barriers and regulations in welcoming new technologies. There may be completely different rules that we need to overcome, but I can say that this will be a better chance to implement blockchain technology into their financial services than developed countries like Japan. For example, Japan has FISC guidelines that force banks to protect servers in an isolated environment, but blockchain technology can even allow servers to run on the Internet and be exposed to the public without compromising security levels. So, when it comes to political or cultural barriers, I believe that developing countries will implement blockchain technology faster than other countries, and even compete with developed countries.”

The future of Techbureau, Infoteria and BC Finance experiments

It’s a positive development that blockchain technology is starting to really have an impact on people in developing countries. We also interviewed Jeremy Kloiser-Jones and Takao Asayama to discuss the future possibilities of using blockchain technology in developing countries.

Kloiser-Jones believes that the future of blockchain technology is immeasurable. He hopes that blockchain technology can enable BC Finance to better provide flexible services to those who are not fully financially served. He said that they have already started in Myanmar, but many other countries are also looking to develop.

Asayama plans to introduce 'robust' smart contracts that focus on simple asset transactions, rather than complex programming languages, which can reduce the probability of errors and failures.

He said:

“Having learned from the experience of The DAO, I am confident that simple ‘enterprise smart contracts’ like this will become more possible, as most execution of contracts will be done off-chain. Once we have smart contracts, Mijin will be a powerful tool for people to manage each other’s assets, transactions and contracts. We are very much looking forward to unleashing the power of the Mijin blockchain in the summer of 2016.”

Japan has an edge in global fintech

Japan is making inroads into the global fintech space, collaborating with other countries, as can be seen from the example of Mijin.

As a software supplier from Japan, Takao Asayama is very confident. He said:

“I am very confident that our product Mijin is one of the few stable and complete platforms, and there are some strong system integrators, such as our partner Currency Port and our alliance partners such as Infoteria or GMO, who are also ready to release products to serve Mijin. I believe that Japan’s small step will bring great success to the blockchain fintech alliance.”