Myanmar Banking Sector: Progress, But Still Many Challenges

Despite significant progress in recent years, Myanmar’s banking sector still faces numerous challenges that hinder its development. The country’s central bank, the Central Bank of Myanmar (CBM), has implemented various reforms aimed at improving the financial landscape, but more work needs to be done.

Obstacles to Growth

• Strict Control over Interest Rates: One major obstacle is the strict control over interest rates, which limits competition among banks and restricts their ability to offer attractive loan terms to customers. This can make it difficult for small businesses and individuals to access credit.
• Heavy Reliance on Cash Transactions: Another issue is the heavy reliance on cash transactions, with only a small percentage of citizens having bank accounts or using electronic payment methods. The country’s lack of a comprehensive payment infrastructure has hindered economic development and created opportunities for corruption.

Positive Developments

• Automated Clearance System: The CBM has implemented an automated clearance system, known as CBM-Net, which allows for real-time gross settlement (RTGS) transactions between banks.
• Financial Institutions Law: The government has passed a financial institutions law that empowers the CBM to regulate electronic payment systems and install electronic payment infrastructure.
• Myanmar Payment Union (MPU): The MPU, a business association comprising 23 out of 28 local banks, has played a key role in promoting electronic payments and issuing debit and credit cards. Mastercard and Visa have partnered with MPU members to issue co-branded credit cards, which has helped increase the use of non-cash payment methods.

Challenges Ahead

• Financial Inclusion: Myanmar still lags behind its regional peers in terms of financial inclusion. The country’s ATM-to-population ratio is relatively low compared to other ASEAN nations, and many citizens do not have access to bank accounts or credit facilities.
• Payment Infrastructure: More needs to be done to improve payment infrastructure and increase the use of electronic payment methods.

Conclusion

While there have been some positive developments in Myanmar’s banking sector, more needs to be done to address the numerous challenges that remain. The government and financial institutions must work together to promote financial inclusion, improve payment infrastructure, and increase competition among banks to drive economic growth and development.