Abstract: "Microfinance has become a significant global phenomenon, as an effective means of providing financial services to poor and low-income people who don?t generally have access to these services from formal financial institutions_ In recent years the concept of Financial Inlclusion has become increasingly widespread in the realization that the underserved population requires a broad range of such services, not merely savings and credit, to enable them to conduct their financial lives more efficiently. Microfinance assists poor people in gaining access to usefully large sums of money which they require for different purposes. It does so by means of innovations in loan contracts, which allow microfinance institutions (MFIs) to limit losses despite lacking good information on borrowers, and without requiring collateral as security. The main innovation is the "group lending" mechanism, to apply social pressure for contract enforcement. Another vital factor that strongly influences repayment is the promise of access to future loans and services. The two key principles that the industry generally focuses on are outreach (the scale of activity in terms of numbers of clients) and sustainability (the degree to which the MFI covers its costs). To become sustainable, MFIs charge rates higher than those of formal sector institutions (as their costs are also relatively higher), but well below those informal moneylenders, the main alternative source of credit for poor households. While empirical evidence has not been able to illustrate a significant impact on poverty alleviation, it does show that access to the right financial services helps poor people to build more secure lives by allowing them to more regularly spend resources to cover basic needs and protect themselves from risks. Microfinance has also had an effect on women?s empowerment in terms of increased ownership of assets and an enhancement of their status in the household and at the community level, although this has been partially offset by the new set of challenges women face by bearing the responsibility repaying loans they have taken. In Myanmar the microfinance sector has developed rapidly since the government enacted a Microfinance Law in November 2011, but MFIs still play a very minor role in the provision of financial services in the country. The overall level of financial inclusion remains very low, with only 30% of adults using regulated financial services. The rural usage of financial services (53%) exceeds the urban usage (45%), which is a reversal of the normal global pattern. The reason for this is that development assistance to the micro-finance sector was focused on rural areas. The Microfinance Law has provided an enabling framework for the sector, but certain areas of the regulation may inhibit expansion of credit to priority areas, such as rural and agricultural (interest rate caps, loan size caps and access to capital). In order to strengthen the sector, it is recommended focus on the areas of policy, capacity development, capital incentives and research and data, with some suggested actions within each of these. Together with some complementary measures in other sectors, the promotion of a higher level of financial inclusion can offer the chance for poverty alleviation on a large scale in Myanmar."