As Myanmar continues to open-up to the rest of the world, the country’s banking sector is a major sector being called upon to accept more foreign investment.
As a country recently untangled from Western sanctions, Myanmar’s banking sector remains well-behind the curve.
It was only five years ago, in 2011, that the country got its first new batch of ATM’s after authorities took all of them off-line in 2003 in the midst of a severe banking crisis.
A recent report by global consulting firm Roland Berger shows, less than one-in-four people in Myanmar have a bank account, and only 2-percent hold debit cards.
And it was not until early this year that the country’s banking system adopted a real- time gross settlement system, which makes the once-manual process of clearing and settling payments almost entirely electronic.
“Part of the issue is that banks, until recently, weren’t designed to serve the consumer.”
Hal Bosher is CEO of Yoma Bank, a leading private bank in Myanmar.
“I mean they’re designed around the central bank. Central banks are not there to serve the customer. They are central banks, right? So I think that mind-set shift will happen gradually.”
One of the solutions being offered to update the banking sector in Myanmar is to introduce foreign investment.
In 2014, Myanmar’s central bank granted the first batch of licenses to 9 foreign banks, among them the Industrial and Commercial Bank of China.
Liu Xinchun is Deputy General Manager of ICBC’s Yangon Branch. He said “as far as Myanmar’s banking sector goes, it’s still in a primitive stage. The establishment of new banks, or the introduction of foreign investment, is a matter of necessity since the country needs more financial resources for development, and its existing resources are far from enough.”
But how the value of the funds can be fully realized at an early date is still uncertain.
ICBC’s Liu Xinchun says this is going to require a fundamental re-think of how the system currently operates.
“The biggest bottleneck lies in the investment environment of the banking industry. Be it bureaucracy or its unsound laws, they all affect further development of the entire financial sector, especially foreign-funded banks. For instance, the banking sector is currently only partly open to foreign investors, and regulators have yet to adopt a principle of national treatment for foreign banks. If they do, foreign banks should be allowed to have the same level of business, as well as be under the same supervision requirements, as domestic banks,” said Liu
Foreign banks are currently only permitted to open representative branches with a limited number of activities.
They are only allowed to lend money to foreign-funded businesses or to local banks, but not directly to local businesses or individuals.
Foreign banks are also restricted from owning real estate assets in Myanmar.
China Report ASEAN 