Seng Lu runs a convenience store in Myitkyina, the capital of Kachin State in the northeast of Myanmar. Like thousands of other small shopkeepers across the country, she offers more than just basic goods. On an average day, more than 20 people come in to transfer money using KBZPay or Wave Money, two of the mobile payment services that have begun to proliferate across Myanmar over the past few years. As a transfer agent, she takes in cash from people wanting to send money and hands it out to people who are receiving digital payments from elsewhere.
But since the February 1 military coup, Seng Lu — whose name has been changed to protect her identity — has had to turn customers away because she hasn’t been able to get hold of enough banknotes. The banks that underpin the mobile money ecosystem are now mostly closed, their representatives aren’t coming out to replenish Seng Lu’s cash supplies, and few people now want to convert their physical currency into digital.
A lack of internet access has compounded the problem. In a likely attempt to contain mass protests against its seizure of power and reduce the flow of news and information, the Myanmar military, known as the Tatmadaw, has routinely forced telecoms operators to turn off access to the mobile internet. It blocked mobile data across the country beginning on March 15, and since April 2, it shut down all wireless broadband internet, leaving available only fixed-line services, to which few have access. A total internet blackout has been imposed nightly since February 15. Without mobile internet access, people are increasingly reliant on cash and cash-based transfers. “Most of the customers want cash nowadays. We still allow some people to pay by [KBZPay] but most of the shops accept cash only now,” Seng Lu said.
The junta’s internet blockages have shut down swathes of the online economy, its violence against civilians has left many people afraid to leave their homes, and the coup has left the country internationally isolated, disrupting the flow of money into and around the country. A civil disobedience movement, which includes massive workplace walkouts, has shut down banks and businesses. All together, this has pushed Myanmar’s nascent digital economy to the brink.
“The whole digital economy basically collapsed when they started blocking mobile internet,” one leading internet entrepreneur in Yangon told Rest of World, speaking on condition of anonymity for fear of reprisals from the junta. Thousands of small internet businesses operating on Facebook have had their businesses gutted by the internet outages and blocks to the site. Even before the coup, only around 30% of Myanmar’s population had a bank account at a formal financial institution. With mobile payments services now struggling, the coup has turned back the clock on efforts to bring people into the formul financial sector in the country.
“I guess the whole agenda around financial inclusion, giving unbanked people access to finance, is now — well, it’s now crushed,” the entrepreneur said.
The Tatmadaw last ran Myanmar between 1962 and 2011. When they finally handed over power to a quasi-civilian administration, they passed down an economy decades behind its neighbors in Southeast Asia. Tight control over telecoms, the media, and the financial sector meant that, by December 2011, only around 1% of the population had internet access, according to U.N. data.
Over the last decade, the economy has opened up significantly. Telecoms were deregulated, investment started flowing in, and highly educated people in the diaspora returned to set up businesses, while local entrepreneurship blossomed. Internet penetration surged to around 43% by 2021, and social media — in particular, Facebook — became ubiquitous. A small but vibrant tech community sprung up, centered in Yangon.
“There was a lot of hope for entrepreneurship and the startup ecosystem in Myanmar,” said Field Pickering, head of venture investing at Vulpes Investment Management, an investment company based in Singapore, which first entered Myanmar in 2017. “We said, if we start writing checks into this burgeoning ecosystem, and it takes off, like other markets like Vietnam or Indonesia, then we’ll have front-row seats.”
Vulpes invested in ten tech companies over the next two years. Several other funds and regional tech companies also started searching for deals around that time. Chinese fintech giant Ant Group invested more than $70 million into Myanmar-based payments startup Wave Money, while its parent Alibaba acquired a local e-commerce site, Shop.com.mm. The Japanese conglomerate Sumitomo invested an undisclosed sum in NearMe, another Burmese fintech company, in 2020. Other local transfer services emerged, like OnePay and OK Dollar, and several local banks started their own digital payment businesses.
Although the size of the investments was small by global standards, they represented a dramatic jump for the local industry. Trust in the banking sector has been low since a major crisis at the Burmese banks in the early 2000s that brought the financial system to its knees. As in other emerging markets, digital financial services have begun to fill the gap left by absent or inaccessible bricks-and-mortar banks.
As recently as 2016, 44% of domestic remittances were made via cash in envelopes, often transported by bus, according to the market research firm Kantar. By November 2019, mobile money accounted for 80% of all money transfers in the country.
Mobile transfers were more secure, more convenient, and helped link people from rural areas, including farmers, with urban consumers. App-based services, such as ride hailing and food delivery, also took off in recent years in wealthier urban centers.
By November 2019, mobile money accounted for 80% of all money transfers in the country.
The formal e-commerce industry is still small, but there was significant growth in digital micro-enterprises, most of which operated on Facebook.
But since early February, Facebook has been officially banned in Myanmar, along with almost all other social media platforms. Although many users are still accessing the sites using virtual private networks, the disruption to trade has been significant, entrepreneurs told Rest of World. A local entrepreneur who advises several internet businesses and requested anonymity told Rest of World that Myanmar’s e-commerce industry was worth in the ballpark of hundreds of millions of dollars. “That’s a whole industry that’s been wiped out today,” they told Rest of World.
Since the coup, bank closures have also left cash scarce and expensive. With most of the country’s private bank branches closed, bank-to-bank transfers and international payments have largely stopped working. Even large transactions now have to be done in cash. But cash shortages are increasingly dire. In Yangon, people have queued for hours outside ATMs, where daily withdrawals have been limited since March 1 and are now between $142 and $356 (200,000 and 500,000 kyats) per day, depending on the bank. On March 31, the German company Giesecke+Devrient suspended deliveries to Myanmar of products used in making banknotes.
Three entrepreneurs in Yangon told Rest of World that they have to pay a commission of between 2% and 6% on cash withdrawals via agents. Even licensed money changers are now taking large commissions.
One employee at a retail company in Yangon said that she has effectively become an informal money agent since the coup. After struggling herself to access cash for her daily needs, she realized that her company was sitting on a lot of money, which it couldn’t deposit because the banks were closed. The employee, who asked not to be identified, began advertising a money exchange service on Facebook, using a VPN, and started accepting transfers into her personal account via mobile money — using fiber-optic Wi-Fi connections, which are still active — and handing out the company’s cash. She then transfers the equivalent amount back into the company’s account from her own.
“If they want 500,000 kyats [$356] from me, I pay them 500,000 kyats,” she said. “Sometimes the customer wants a huge amount of cash, but I don’t have enough, so I have to turn them away and tell them to come back tomorrow or the next day. If they need it urgently, I have to find a way to get cash, and for that, they have to pay charges.”
The disruptions to banking and mobile money transfer have also hit remittances from the diaspora, which amounted to $2.4 billion in 2019, or more than 3% of the country’s GDP, according to World Bank figures. Around 4 million Burmese people work outside the country, according to the United Nations, with Thailand and Malaysia the leading destinations. Up-to-date data is unavailable, but money transfer agents in Malaysia, and people in the diaspora in Thailand and Singapore, told Rest of World that commissions on transfers have, in some cases, doubled or tripled, with increased rates both at the sending and receiving end. The shortage of cash at mobile money agents in Myanmar means that people outside the country can only send small amounts to a single receiver, and now people often have to split the remittances between several receivers to get around the problem. One agent in Malaysia told Rest of World that the maximum amount he can send via Wave Money is now $356, but, in practice, many local agents in Myanmar can handle less than half of that. Agents without fixed-line broadband — mainly those outside of major cities — are now totally inaccessible.
The restrictions on incoming transfers have also hindered supporters of the civil disobedience movement that is resisting the coup. Tens of thousands of professionals, including doctors, nurses, and civil servants, have left their salaried jobs in an ongoing general strike. The movement has been taking donations locally and internationally to support its members, and fundraising campaigns have sprung up worldwide.
Locally, activists involved in the fundraising effort say that they face the same cash shortages as businesses, with donations stuck in mobile money accounts that few merchants will now accept. They have to withdraw money in small amounts, paying service fees every time.
“Our budget is millions of kyats, and we face difficulties withdrawing cash,” Toke Toke, an activist in Myitkyina, told Rest of World. “For example, when we withdraw 100,000 kyats via [KBZPay], the service fee is 1,500 to 2,300 kyats. Mostly, our group members pay the service fee from their pockets because they don’t want to touch the donations.”
One overseas donor helped Toke Toke’s group set up a website for donations, which flows into their bank account, but they still need to find someone who can convert the foreign currency into kyat.
One activist based in Thailand told Rest of World that they had reverted to using hundi, an informal system of transfer run by middlemen whose businesses generate cash. Typically, commodity traders who have bank accounts in Myanmar and in other countries, usually Singapore, Thailand or the U.S., will take in foreign currency overseas and hand out kyat in Myanmar. The hundi system was widely used during the last period of military rule — even by international aid groups.
The activist in Thailand said he worries that the hundi route could be also closed off, as it has “money laundering connotations,” and could fall foul of attempts by the international community to put financial pressure on the regime by shutting down illegal routes for money to come into and out of the country. The military regime could also block these transfers. State media reported on March 1 that junta members had discussed “the illegal inflow of foreign money to associations [and] action to be taken against support of manpower and money” behind the protests.
The damage done to Myanmar’s economy is enormous and likely to get worse in the near term, as people leave cities and return to their villages. Radio Free Asia reported on April 9 that nearly half of Yangon’s 6-plus million residents have lost their jobs due to the coup and are struggling to survive, while Frontier Myanmar reported on the exodus of thousands of migrant workers from industrial wards of Yangon — plagued by factory closures and martial law — to their villages, where job prospects are bleak.
Foreign investors who remain in the country have also been hit. “None of our companies are operating; none of the employees are at work. They’re either protesting, or they don’t want to go out on the streets for fear of being abducted by the police,” Pickering of Vulpes Investment Management said. “Making payroll at the end of the month is very difficult.”
In total, junta forces have killed more than 700 people and arrested thousands since the coup. Young people have been at the forefront of the protest movement, and from February 1 to April 9, 354 of those killed were ages 16 to 35.
The coup’s impact on young tech entrepreneurs has been devastating. “Everyone’s just been under enormous psychological stress,” the Yangon-based internet entrepreneur said. “We are also very concerned about a brain drain happening again. These are people who stayed in the country because of the learning and growth opportunities. But now, all of that is being taken away.”
He said that he fears that the junta is digging in and is intent on rolling back decades of progress — including by ending Myanmar’s experiment with the free internet and imposing complete control over which websites and services are available in the country.
“That’s the image that keeps popping into my head … no free internet,” he said. “Then we’re all screwed. … Then we’re really going back to the ’90s.”
