IMPACT OF MICROFINANCE ON RICE PRODUCTION

Giving the poor access to financial services like microfinance, microinsurance, and microfinance is the goal of microfinance. The agricultural sector makes up the majority of Myanmar's economy, and exports of agricultural products provide 10% of the country's foreign cash (Myanmar Customs Department, 2014).

IMPACT OF MICROFINANCE ON RICE PRODUCTION IN AYEYARWADY REGION
Contents
Introduction 1
Research Background 1
Problem Statement 1
Research Objectives 2
Research Questions 2
Rationale of the Study 3
Outline of Thesis 3
Methodology 4
Research Design 4
The Study Area 5
Method of Data Analysis 5
Study Timeframe 8
References 9

Introduction
Research Background
Microfinance is about providing financial services such as microfinance, microinsurance, and
microfinance to the poor. Myanmar's economy is based on the agricultural economy and 10% of
its foreign exchange comes from agricultural exports (Myanmar Customs Department, 2014).
Since national development is dominated by rural development, agricultural development is an
important factor in reducing poverty. In response, the government encourages the development
of micro savings and credit enterprises, provides microcredits to small farmers, and improves
the socio-economic situation of the rural population. Muhammad Yunus (1976) defined
microfinance as "a means of providing credit to non-traditional borrowers (such as the poor in
rural or underdeveloped areas), usually in the form of unsecured microloans." According to
Ledgerwood (2002), “Microfinance is to provide a wide range of financial services, such as
deposits, loans, savings, payment services, remittances and insurance, to poor and low-income
households and their micro-enterprises excluded from financial services. Finance system.”
(Quoted from Giradi and Mwakeje, 2013, p. 227). Then repay the installment loan.
Problem Statement
The agricultural sector is the backbone of Myanmar’s economy, accounting for about
30% to 40% of GDP (World Banking Group, 2014) 1. rice is the staple food of Myanmar and
one of the main export products of the development of focuses on rural development, and the
development of agriculture is an important factor in poverty reduction. The main problem is the
lack of extension services available to farmers, which leads to low profitability. Farmers always
suffer from buying agricultural inputs such as seeds and fertilizers. Most farmers in Myanmar
use their own seeds and few technical agricultural tips. However, there are several types of
informal loan mechanisms. For example, the loans can be related to banking agents or real
estate businesses. These include the liaison service between such broker services, including the
intermediary service between the lender bank and the borrower. In the informal loan market,
interest rates can vary between 3% and 8%, depending on the type of collateral placed ((Forech,
Thein, Waldshmidt, 2013, p.17) 2. The typical payback period is three to six months,

sometimes it can be extended. However, due to the short repayment period, many people who
obtained these loans made 4,444 payments by selling their properties.
Therefore, the government allows the provision of small loans and savings services to
people in rural areas who do not have access to banking services. The government provided
input subsidies, including a pool of funds as a contribution to the sector. The borrowers
received much lower loan interest rates than the interest rates they paid to informal lenders.
However, microfinance is still limited and its impact is unclear. According to Ko Ko (2013),
“Providing microfinance to farmers can meet urgent needs, but in the long term it will not
improve the socio-economic lives of farmers, which can create a burden of debt.
This think around looks for to analyze the ampleness between credit supply and the
needs of rice ranchers in Central Benin, in organize to recognize approaches for moved forward
agricultural-oriented cash related organizations. In organize to ensure nourishment self-
sufficiency for rice, with the prospect of serving sub-regional and territorial markets, it is
principal to set up financing plans custom fitted to the prerequisites of rice ranchers. Financing
hindrances interior the agrarian parcel, in this way, constrain the valuable capacity of down and
out agriculturists (Shah et al. 2008). Interior the setting of expanding inquire for common
financing in making nations, counting Benin, commercial banks appear up a compelled
captivated in financing this division (Kodjo et al. In Sub-Saharan Africa, the agrarian division
plays a key parcel in taking care of disheartening and advancing nourishment security (Sheahan
and Barrett 2014; Affognon et al. 2015). Giving farmers with palatable inputs may develop
agrarian enhancement (Shah et al. 2008). The show think almost was built on an arranges
framework combining the characteristics of rice farmers and their farms, the money related
organizations publicized (Kumar et al. This discourages the modernization of cultivation by
lessening the utilize of imaginative progressions (Adégbola et al. 2009; Tarchiani et al. 2017).
Without a doubt, rice has powerfully finished up a basic food in both nation and urban districts
of Benin and contributes to food security (Konnon et al. 2014). 2012), the categorization of rice
agriculturists concurring to their wants (Aoudji et al. Microfinance has, in this way, finished up
the foremost supplier of provincial finance (Wampfler and Lapenu 2002; Morvant-Roux et al.
2010). Recording the specific necessities of farmers appear offer assistance the government and
other accomplices in agrarian financing in making palatable approaches to fulfill these
prerequisite.

Research Objectives
The overarching objective of this study is to analyze the impact of microfinance on the
rice production in Myanmar using a case study. Specifically, the study intends to:
1. Investigate the levels of credit volume by farmers
2. Analyze the impact of microfinance on rice production and;
3. Review the impact of microfinance on market accessibility by farmers with access to micro
credit.
Research Questions
Based on research objectives, the following research questions are
1. What is the impact of microfinance on the productivity of rice?
2. What are the underlying factors contributing to the increase in the production of rice?
3. How important is microcredit in improving farmers’ income?
Rationale of the Study
The new government was democratically elected in 2010. During the transition period,
the new government is committed to speeding up poverty alleviation and rural development.
Myanmar's economy is based on agriculture, and the agricultural sector contributes about 40%
of GDP. Most exports are based on agriculture. However, progress in agriculture is limited by
micro-instability, limited infrastructure, land, marketing and financial issues, and farmers'
inability to obtain high-quality research (Social Reform and Economic Framework, 2012, p.
35)3. Therefore, poor agricultural performance has a negative impact on the overall
development of the rural sector.
To support agricultural development, the Parliament enacted a new land law, granting
farmers ownership and encouraging the development of agricultural fallow land, and enacted a
new microfinance law to improve access to financing. The government supports the provision
of 4,444 microcredit and savings services to rural areas.

Although some studies have evaluated the impact of microfinance on rural development,
most studies focus on poverty eradication and empower women through participation in
microfinance and rural development programs. In short, in the rural areas where most low-
income farmers live, there is insufficient empirical evidence on the impact of microfinance on
rice production Therefore, this study fills the gap in the existing literature on the impact of
microfinance on rural development.
Outline of Thesis
This thesis is mainly divided into five chapters. The first chapter briefly presents the
relationship between microfinance and rice production, the research problem statement, the
research purpose, the research problem, and the basic principle of research. The second part is
a review of the literature. Chapter 3 presents conceptual frameworks, research methods, and
research methodology. Chapter 4 presents and highlights the results of the analysis. The results
and findings of the investigation are discussed. Chapter 5 and the last chapter summarize the
research findings and make recommendations for the development of microfinance enterprises
that affect rice production.
Methodology
This study uses households as the sample unit. Families are divided into credit recipients
(CB) and non-credit recipients (NCB). During the monsoon season, 15,158 households produce
rice. In most cases, in Myanmar, farmers produce rice twice a year, during rains and summer. In
the study area, the main microfinance institution is the Myanmar Agricultural Development
Bank (MADB), which provides loans to farmers for rice production during the monsoon season.
In each category, 50 households were randomly selected from the sample. The investigation
period of the original data is one year (2014), focusing only on monsoon rice production.
Questionnaires were distributed and interviews were conducted. The structured and
open questionnaires are designed to collect qualitative and quantitative information about loan
beneficiaries and non-beneficiaries, respectively questionnaires were designed and were
distributed to farmers for in-depth data collection. The purpose of this interview is to gather

specific information about each family to understand the family's credit status, production and
market patterns. The data collected in this stage includes socioeconomic characteristics, 4,444
loan amounts borrowed, 4,444 agricultural inputs used, 4,444 agricultural inputs, types of
agricultural technology, market access and prices, and productivity and production levels. The
main objective of this research is to test the hypothesis about whether microfinance has a
significant impact on Myanmar's rice production. Therefore, a hypothesis test of the difference
between independent sample means is used. Apply the T-test to test the difference between the
variable means of the two categories of farmers and perform a regression analysis.
Research Design
Productivity of rice is expected to be high by farmers with CB (treatment group)
compared to NCB (control group). Productivity may change depending upon changes in the
types and quantities of inputs and technology used. It is also expected that, farmers who
accessed credit will produce higher quality rice and will have opportunity to access markets. In
this study the productivity of rice will be analyzed. The productivity is determined in terms of
yield (ton) per acre
The Study Area
Ayeyarwady Region, also known as the Delta region, is a coastal region between the
Bay of Bengal to the west, and the Andaman Sea to the east. The capital city is Pathein. Sharing
a border with Rakhine, Bago, and Yangon, Ayeyarwady Region consists of 26 townships,
covering a total of 35,964 km2. Ayeyarwady is Myanmar`s most populated state with an
estimated population of 6.32 million (2011 HMIS data) and population density of 176 people
per square kilometre. Ayeyarwady is the region with the greatest percentage of people living in
rural areas (88%) relative to urban areas (12%) living in urban areas. This area was the severely
affected by Cyclone Nargis in 2008
Ayeyarwady Region is heavily forested and wood products are an important component
of the economy. The principal crop of Ayeyarwady Region is rice, and the division is called the
“granary of Burma.” In addition to rice, other crops include maize, sesame, groundnut,

sunflower, beans, pulses, and jute. Fishery is also important; Ayeyarwady Region produces fish,
prawn, fishpaste, dry fish, dry prawn, and fish sauce.
Ayeyarwady Region also has considerable tourist potential. The city of Pathein has
numerous historic sights and temples. Outside Pathein are the beach resorts of Chaungtha
Beach and the lake resort of Inye Lake. Inye lake is located in Kyonpyaw township, 59 miles
(95 km) north east of Pathein. Inye lake is also well known for fishery, as the major supplier of
fresh water fish. Chaungtha is located in Pathein township. However, hotel and transportation
infrastructure are still very poorly developed.
Method of Data Analysis
The main study of this study is to test a hypothesis on whether there is any significant
impact of microfinance on production of rice for two household groups. Therefore, Hypothesis
Tests for Differences between Means for Independent samples is used. T –test is applied to test
the difference between means of variables regarding the two farmer categories (i.e., CB and
NCB) at 5% level of significance.
Mean Values
Mean value is calculated as follows:
Z= (X1 - X2) - √(S12/n1) + (S22/n2)
Where: X1 and X2 are output means of two
groups; S1 and S2 are sample variables for the
two groups; n1 and n2 are sample size for the
compared groups.
H0: μ1= μ2 (yield of paddy in Kg/acre) (The yield of paddy is no difference between two
groups.)
Ha: μ1 ≠ μ2 (The yield of paddy is difference between two groups)

If Z- value is greater than critical value – C, the null hypothesis can be rejected and
conclude that there is a significant impact of microfinance on the productivity of
rice.
Model of Quantitative Data Analysis
The linear regression analysis is expressed as follows:
Q = f (X1, X2, X3, X4, X5, X6, X7, X8, X9, X10, X11, X12, X13, X14, X15)
Q = a + b1X1 + b2X2 + b3X3 + b4X4 + b5X5+ b6X6 + b7X7 + b8X8 + b9X9 + b10X10
+ b11X11+ b12X12+ u, Where,
Q = rice proudctivity
(out per ton) a =
constant
b ‟s = coefficients to be
estimated. X1
=Fertilizer
X2= Seed
X3= Pesticides
X4=
Cultivation
Method X5 =
Hired Labor
X6 = Microfinance
(Loan amount) X7 =
Gender
X8 = Water Pump
X9 = Gender X9 =

Year of Schooling
X10= Warehouse
X11= Harvesting and
Threshing Machine X12=
irrigated
u = error term
H0: μ1= μ2 (yield of paddy in Kg/acre) (The yield of paddy is no difference
between two groups.) Ha: μ1 ≠μ2 (The yield of paddy is difference between two
groups)
Study Timeframe
In order to complete during the time permitted, the research activities will be conducted as
scheduled in the following table of timeframe.
Task
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Preparing Research
proposal
Submission of
proposal defense
Writing chapter 1, 2
& 3
Writing chapter 4
Data collection

Data entry
Data analysis
Writing chapters 5
Update literature
review and Finalize
Chapters 1 - 5
Submitting the
research report to
supervisor and doing
the corrections
Sitting for final
defense
Final corrections and
submission

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