Myanmar’s financial services sector is still in a nascent stage of development and while other sectors have opened up, the banking sector has proceeded similarly just a month ago, when the government issued preliminary licenses to 9 foreign banks to start offering some basic services to foreign companies operating in Myanmar. Thankfully, the interests of the local banks have been protected at the outset, but there is hope that this will spur the local operators towards better performance and adherence to international service standards.
I remember my first trip to Yangon in October 2012, and I had the privilege of seeing the first ATM machine being installed. By the time we moved here in January 2013, a handful of them had been installed, but getting cash out of them was not a given-they worked sporadically. So, removing all credit and debit cards from our wallets was the first thing we did each time we returned to Yangon. It is habit that continue-carrying paper money is preferable to plastic, and I have tried using an ATM card to withdraw cash at least six times, but not succeeded with a successful transaction even once. However, I do see hundreds using them and successfully I am sure, I have just become accustomed to the way of life prevalent in the 1970s in India.
Myanmar today has state and private local banks, with the latter offering far superior services and are positively flush with funds. Yet businesses have limited access to funds and loans come with only high collaterals.
Foreign banks had been allowed to open representative offices as a precursor to applying for a license. License applications were invited in May 2014, and 30 international banks applied for the same, of which 25 were shortlisted. It was only on the last day of September that nine banks were allotted licenses. These include ANZ, Bangkok Bank, UOB Bank, Industrial & Commercial Bank of China, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, Mizuho Financial Group, Malayan Bank and Overseas Chinese Banking Corp.
All these banks have been given twelve to build a single branch in the country, and while they cannot start retail banking operations, they can assist foreign businesses and deal only in foreign currency. If these banks wish to deal with local currency, they will be permitted to do so, only in partnership with a local bank.
While these licenses have ushered a wave of optimism, local businesses will continue being dependent on local banks, whose interests have been protected. But growth and development requires funding which will take a long time to come.
But perhaps, in the growth story, every little step counts. And hopefully the banks winning the preliminary licenses may bring in a wave of transformation in the banking and finance sector.