Financial Crime World

Myanmar’s Financial Sector Struggles with Growth and Regulation

A Rapidly Growing but Unregulated Market

YANGON, MYANMAR - Myanmar’s financial sector has experienced rapid growth in recent years, driven by the country’s economic reforms and the entry of new players. However, the sector is facing several challenges, including a lack of control and supervision.

The Microfinance Industry: A Concerning Growth

The microfinance industry, which was legalized in 2011, has seen a significant increase in the number of licensed institutions, with 166 MFIs operating in the country as of September 2013. However, the lack of effective regulation and supervision has raised concerns about the sector’s stability and sustainability.

Key Players in the Microfinance Industry

Here are some key players in the microfinance industry:

  • MFI-1: Provides microloans to small-scale farmers with an interest rate of 20% per annum.
  • MFI-2: Offers savings accounts and microloans to low-income households with an interest rate of 15% per annum.
  • Pawn Shop: Lends money against gold, watches, machinery, bicycles, garments, and reconditioned clothes with an interest rate of 24-120% per annum.

The Informal Financial Sector: A Concern

The informal financial sector is also thriving in Myanmar, with pawn shops and unlicensed money lenders providing financial services to those who cannot access formal credit. While these institutions are often seen as a lifeline for many poor people, they are often characterized by high interest rates and lack of transparency.

Challenges Facing the Financial Sector

The financial sector is facing several challenges, including:

  • Lack of effective regulation and supervision: The government needs to introduce more stringent regulations and supervision measures to ensure the sector is able to withstand shocks and provide financial services to all segments of society.
  • High levels of non-performing loans: The sector needs to address the high level of non-performing loans to maintain stability.
  • Limited access to formal credit: Many people in Myanmar lack access to formal credit, making them reliant on informal lenders who often charge high interest rates.
  • High interest rates charged by informal lenders: Informal lenders often charge exorbitant interest rates, which can perpetuate poverty and inequality.

Conclusion

In conclusion, Myanmar’s financial sector is facing several challenges as it strives to achieve stability and sustainability. The government needs to introduce more stringent regulations and supervision measures to ensure the sector is able to withstand shocks and provide financial services to all segments of society.