Financial Crime World

Myanmar’s Banking Sector: Challenges and Progress

YANGON, MYANMAR - In a country where cash is king, Myanmar’s banking sector faces numerous challenges in its development. Despite some progress in recent years, the industry remains constrained by outdated regulations and infrastructure.

Challenges in Development

  • Interest Rate Controls: The sector is limited by interest rate controls, which prevent banks from competing on loan rates, leading to a lack of competition in lending, particularly for rural populations.
  • Collateral Requirements: Strict collateral requirements have impeded credit creation. Until 2013, only land was accepted as collateral, and even now, many banks still demand land as the sole acceptable form of security.
  • Overcollateralization: Some banks require up to 200% of loan value in collateral, making it difficult for businesses to access loans for longer-term investments.

Infrastructure Limitations

  • Cash Reliance: Myanmar’s heavy reliance on cash transactions has slowed down financial transactions, increased costs, and created opportunities for corruption.
  • Lack of Electronic Payment Infrastructure: The country lacks a robust electronic payment infrastructure, making it difficult to implement efficient financial systems.

Progress and Developments

  • Real-Time Settlement System: The Central Bank of Myanmar introduced a real-time settlement system between banks, expected to improve efficiency and reduce risks.
  • ATM and Point-of-Sale Terminal Growth: The number of ATMs and point-of-sale terminals has grown rapidly, with the Myanmar Payment Union (MPU) playing a key role in implementing a national payment switch and expanding the use of debit and credit cards.

Comparing to Regional Peers

  • ATM Density: Myanmar has fewer than two ATMs per 100,000 people, compared to 32 in Laos or 114 in Thailand.
  • Debit and Credit Card Use: The use of debit and credit cards requires having a bank account, which is a service that many Myanmar citizens do not have.

Road Ahead

Despite the challenges, there are signs of progress in Myanmar’s banking sector. The government has implemented reforms aimed at liberalizing the economy and increasing financial inclusion.

  • Addressing Challenges: To unlock significant economic growth and improve the lives of its citizens, it is essential that the banking sector addresses these challenges and builds on recent progress.
  • Policies and Infrastructure: With the right policies and infrastructure in place, Myanmar’s banking sector can overcome its limitations and drive economic development.