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Myanmar’s Banking Sector: Challenges and Progress

Yangon - Myanmar’s banking sector is making strides towards modernization, but still faces significant challenges in developing its infrastructure and expanding access to financial services.

Key Obstacles to Banking-Sector Development

According to a recent report by the Milken Institute, one of the key obstacles to banking-sector development is the country’s reliance on cash transactions. Until recently, bank transfers even between branches of the same bank often involved physically transporting sacks of cash from one location to another. The government has made progress in this area, with the implementation of an automated clearance system for the Central Bank of Myanmar (CBM) and the passage of the Financial Institutions Law.

Progress Made

The CBM’s real-time gross settlement (RTGS) system, known as CBM-Net, became operational in 2016 and facilitates large transactions between banks. The government has also empowered the CBM to issue regulations for an electronic payment system and instructed the banking sector to install electronic payment infrastructure.

Challenges Remain

While progress has been made, not all banks have implemented electronic payments, and about a quarter of banks still do not have a SWIFT code. Additionally, many Myanmar citizens lack access to bank accounts, with only 0.4 percent of those over 15 years old using a bank account to receive wages and government transfers.

Retail Progress

On the retail side, the number of ATMs has grown rapidly, from several hundred in 2013 to near 1,700 by early 2016. The Myanmar Payment Union (MPU), which has 23 out of 28 Myanmar banks as members, has also been successful in implementing a national payment switch and expanding the use of debit and credit cards.

Comparison with ASEAN Countries

However, compared to other ASEAN countries, Myanmar still lags behind on several important indicators. For example, it has about two ATMs per 100,000 people, compared to 32 in Laos or 114 in Thailand.

Credit Bureau Gap

The country also lacks a credit bureau, which is an essential tool for banks to assess the creditworthiness of potential borrowers and expand lending to small and medium-sized enterprises (SMEs). The lack of access to credit has been identified as one of the key challenges facing Myanmar’s SME sector, with many businesses struggling to finance their growth and expansion.

Conclusion

Overall, while progress has been made in developing Myanmar’s banking sector, there is still much work to be done to address the country’s financial infrastructure and expand access to financial services for its citizens.