In Myanmar’s slums, women pool savings to get relief from crushing loans

Women in the Yakhine Yo Ley village of Yangon meet one Sunday a month to discuss the progress of their community saving group. By pooling savings and offering each other low-interest loans to pay off other debts and invest in family businesses, they have improved their economic standing. (Connor Macdonald)

YANGON, Myanmar — It’s late on a Sunday morning and the sun is beginning to beat down on the tin-roofed huts of Yakhine Yo Ley, a village on the outskirts of Yangon, Myanmar’s largest city.

Sixty women of all ages sit cross-legged on the wooden floor of one of the huts, sipping tea and chatting in low whispers. All eyes are on a small middle-aged woman standing before one of several large charts pinned to the thatched bamboo walls. The charts are filled with columns and numbers displaying, among other things, the incomes and savings of each of the women.

She motions to the charts, then glances across the room. “It doesn’t matter if there are 8 or 60 of us,” she says. “By working together we have achieved success.”

Suddenly, quiet gives way to spirited shouts of approval from the floor. “Yes, that’s true!” one woman can be heard yelling above the clamour. “Not wrong at all!”

In this neighbourhood, the women have set up a savings cooperative. Everyone makes weekly deposits into a community fund — and can access loans at reasonable rates. This has enabled families to break free from the clutches of debt collectors.

Like millions in Myanmar, the women of Yakhine Yo Ley were once trapped in a vicious cycle of debt. They owed money to landlords and loan sharks, sums that kept growing with interest, making it impossible for people as impoverished as they are to pay off the loans in full.

That was until a local NGO called Women for the World convinced the women to form the savings group. They pooled what little money they had so they could begin issuing each other their own loans, on their own terms.

One Sunday every month, the group meets to discuss the monthly progress of their savings scheme.

The savings group requires each of the neighbourhood’s 65 households to put away 1,000 Kyat per week, the equivalent of 70 U. S. cents. Twice a year, families can take out a small, low-interest loan, which they can use to pay off outstanding debts, to buy supplies for their businesses, or to pay for their child’s education.

The group also saves 30 percent of deposits in a community “rainy day” fund to pay for funerals.

“Before, we had no community,” says Pyit Phyo Aung, who as an unofficial leader of the group is the person members go to for financial advice. “We would be socially discriminated against because we were poor. People wouldn’t trust us.”

“After we started this project,” she continues, “we felt a lot happier.”

Drowning in debt

The savings cooperative is a creative grassroots response to a long-festering financial problem that has held back Myanmar’s poorest residents for years.

Myanmar suffered decades of economic mismanagement under a paranoid, isolationist military junta. People feared losing their savings on the whims of the military leaders, which led to a widespread mistrust of formal banks and lenders.

In 1987, General Ne Win famously changed the country’s bank notes to denominations in multiples of nine, his favourite number, wiping out the savings of millions of people overnight. In 2003, weak regulations led to a bank run that saw many of the country’s private lenders facing cash shortages and imposing strict limits on withdrawals.

Trust among neighbors is paramount in the savings scheme. The community’s money is stored in a box, not a bank. (Connor Macdonald)

As a result, an informal market for small loans developed. Landlords, pawnshop owners and individuals with money became the go-to community lenders. Often, small loans come with monthly interest rates of 20 to 30 percent and hefty fees for late payments. While Myanmar now has its first fairly elected government in more than five decades, these expensive informal lending systems remain the norm for many people.

For Pyit Phyo Aung, such loan arrangements were crushing. The mother of two moved here from a rural area, looking for work after her crops started to fail. But life in the city proved difficult. Initially, landlords would allow her family to rent a plot on a monthly contract. But then they would demand the contract be revised to six months paid up-front. Then it was 12 months. The family would move frequently, abandoning homes because their debt was spiraling out of control.

“We had to borrow money from lenders at 20 to 30 percent a month just to pay the rent,” says Pyit Phyo Aung, “When we couldn’t pay back the interest, the lenders would come to the front of our house and swear and shout at us in front of everyone.”

Mike Slingsby, an urban poverty expert who’s worked on poverty alleviation projects in Bangladesh and Cambodia, says that Myanmar has the worst levels of informal household debt in the region.

“I’ve never come across such bad conditions in terms of people being in the hands of money lenders,” says Slingsby. “Both in terms of the percentage and the rates of interest.”

According to his own surveys, between 70 and 80 percent of Myanmar’s urban poor have borrowed money at rates of 20 percent a month. Some charge up to 20 percent on one-day loans.

“There’s a good chance that the lady who sells vegetables in the street has borrowed 10,000 Kyat (USD 7.30) in the morning and has had to pay back 12,000 Kyat (USD 8.80) that evening.”

The house that women built

Eight years ago, Yakhine Yo Ley didn’t exist. The area where it stands was a field, dotted with bamboo slums where destitute families came to scrape together an existence.

It was in these Yangon slum communities that Van Liza Aung and her organization Women for the World (WFW) identified a group of women to partake in a community savings pilot project in 2009. She had developed the idea based on successful models implemented in neighbouring Thailand, and tweaked it to make women the focal point. That was partially because women and children are most vulnerable to poverty. It was also because in Myanmar, the husband are often the earners but women are usually in charge of household decisions.

Establishing the savings group helped residents to obtain a long-term lease on land and a grant to upgrade their homes and community infrastructure. (Connor Macdonald)

Van Liza Aung convinced Pyit Phyo Aung and a few neighbours to each save 700 Kyat (55 U. S. cents) a week in 2009. Van Liza Aung spent time with the group, earning their trust and teaching them fundamental savings techniques. The women quickly began to see a change.

After combining the minimal weekly deposits, the group began issuing small loans at reasonable rates to its members. It wasn’t long before households could finally make ends meet.

“We said ‘come together and bring as much money as you can’,” says Van Liza Aung. “With all of their money pooled together, and with a financial management system, they started finding solutions to their problems. First little individual problems, but then bigger and bigger problems. Soon enough, they could handle anything.”

Bottom-up approach

With savings, the women could even begin to stabilize their tenuous housing situation. Squatters in slum communities like theirs could be evicted at any time by the government, and forced to rebuild their lives elsewhere; the lack of land tenure is another reason Myanmar’s urban poor remain stuck in a cycle of debt.

After two years of pooling savings, the group had a breakthrough. They were able to secure a grant from the Asian Coalition for Community Action, a Bangkok-based fund supporting housing rights. Then, with the help of WFW, the group managed to secure a long-term lease from the government for a tract of land to build what became Yakhine Yo Ley.

The families designed and built weather-resistant houses that sit above marshland on concrete footings, and have tidy gardens out front. They upgraded the site’s dirt roads to concrete, and built sturdy wooden bridges to replace bamboo ones.

As word of the project spread throughout the area, more families moved to the neighbourhood. Soon, with the help of WFW, other slum communities nearby began forming savings cooperatives, securing land and building their own houses.

As the Yakhine Yo Ley group spent down their housing grant, they replenished it with weekly repayments; that money now serves as a revolving fund for members of other savings groups to build their own houses.

Yakhine Yo Ley has paved roads and weather-resistant homes on concrete footings. (Connor Macdonald)

The new groups look to the women of Yakhine Yo Ley as mentors and regularly meet with them for guidance.

Members like Kyu Kyu Moe are an inspiration. She takes out a loan worth 1,000,000 Kyat (USD 730) every five months for her car-washing business, which she says generates enough income for her to easily meet her repayments.

Pyit Phyo Aung takes out the same size loan every five months as well. At the moment, she uses it to pay back debts to relatives and friends who loaned her half the money to buy a car, which has become the family’s main source of income — her husband is a taxi driver.

“At first, even saving 100 Kyat a day was hard,” says Pyit Phyo Aung, sitting on the floor of her modest wooden home. “But now, because we have our businesses, every family can save between 1,000 and 5,000 Kyat a week.” (Between 70 U. S. cents and USD 3.65.)

Trust in neighbours

Everything in Yakhine Yo Ley is based on trust between the group’s members. The community’s money is kept in a box under a bed, not in a bank. This can lead to problems, like when one member ran off when she couldn’t repay a loan.

“Maybe they ran away because they were embarrassed,” says Pyit Phyo Aung. “We would rather that person stayed here and we could’ve helped them out. For us, they stole a little of the group’s money. For them, they left their entire house and had to start a new life.”

Building trust within the group is the most difficult part of the process, says Van Liza Aung.

Pyit Phyo Aung (left) and Kyu Kyu Moe both have benefitted from loans through the savings collective. (Connor Macdonald)

Invariably, it is the women who build these safety nets. While the men have traditionally gone out during the day and earned, it’s the women who stay in the communities.

“Community managed savings… is something which really brings about a change in people’s lives,” says Slingsby. “Usually they’re managed by women and it’s a process that empowers people to show that ‘We can save and we can lend and we can recover our community loans’.”

Pyit Phyo Aung and her friend Kyu Kyu Moe have seen their standard of living increase measurably since they began saving in 2009, but they say some of the biggest changes are less material.

“We help each other here because we are like family members,” says Pyit Phyo Aung. “When you go outside and visit other wards in Yangon, you don’t feel this sort of intimacy. But here everybody is part of a community.”

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Connor Macdonald is a Yangon-based journalist. He writes about development, human rights, politics and migration.  Full bio


  • Women who have joined a neighbourhood savings group put aside the equivalent of 70 U. S. cents per week.
  • Twice a year, families can take out a small low-interest loan, which they can use to pay off outstanding debts, buy supplies for a business or pay for a child’s education.
  • The scheme has helped families get out from high-interest loans, access land tenure and build homes.

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