There is a great need to expand Myanmar’s financial sector. Seventy percent of the country’s adults have no formal access to credit, insurance or other financial services. This leaves many of Myanmar’s citizens reliant on unregulated providers with higher costs or family and friends. However, efforts are being made to improve credit access in Myanmar.
Myanmar had credit cards more up until the country’s banking crisis in 2003. As one of the 21 banks that are Myanmar Payment Union members, Kanbawza Bank announced in May 2015 that it will be Myanmar’s first domestic bank to offer credit cards once again. “We have to manage the services within limits, and that will probably not meet the customers’ wants in the initial stage,” says U Mya Than, Myanmar Payment Union’s chairman.
Another concern is that only a few Myanmar shop owners know how to use point-of-sale machines and will often reject credit cards as a method of payment. Many Myanmar shops accept cash only, a mindset that U Mya Than believes needs to change. “People need to get used to not carrying cash and instead putting money onto their cards. Their habits may change if they can get credit,” he says.
Co-operative Bank Ltd. (CB Bank) plans to issue only secure credit cards in its first stage of helping to improve Myanmar’s credit access. CB Bank also proposed policies and procedures for its credit card program to the Central Bank of Myanmar (CBM). The policies require the bank customer to have the same amount of money on their credit card as they do in their deposit account. CB Bank managing director U Pe Myint says the program will begin once the CBM approves it.
In October 2015, Myanmar’s government announced a goal for 40 percent of the country’s people to have financial services access by 2020 and for 15 percent to use more than one financial services product. The government believes that mobile phones coupled with agent cash-in and cash-out services can accelerate Myanmar’s development toward this goal. Myanmar was also reported to be the third fastest-growing mobile market in the world after India and China. Myanmar’s government is working to ensure that the right business models are put in place to allow mobile operators and subsidiaries to provide financial services.
In December 2016, the World Bank’s board of executive directors approved a $100 million credit to support Myanmar in improving access to financial services for families and small and medium-sized businesses. Myanmar’s Financial Sector Development Project aims to promote the development of a stable financial sector, including reforms to increase the provision of banking services, improved credit access in Myanmar and other financial products across the country.
“Improved access to credit will mean higher incomes and more jobs,” says Ulrich Zachau, the World Bank country director for Southeast Asia. The credit will come from the International Development Association, including credit terms for a maturity of 38 years, a six-year grace period and a 0 percent interest rate. Myanmar’s farmers, small businesses and low-income households will also benefit.
In May 2017, the International Finance Corporation (IFC) successfully supported the CBM in developing a regulation for credit reporting. The CBM also issued a regulation that provides the basis for credit reporting companies’ operations and establishment. This served as a key step toward improving credit access in Myanmar, along with helping the country’s small and medium enterprises.
“With an effective enabling environment that the enactment of this regulation brings, we hope to see the very first credit bureau come online soon,” says DawKhin Saw Oo, the CBM’s deputy governor. The IFC plans to continue supporting the CBM in strengthening its supervisory capability over credit reporting services providers. The IFC will also help the CBM educate Myanmar’s people on credit information sharing and financial consumer protection.
These efforts and others will continue to work toward making credit access in Myanmar possible. Improving the country’s financial services will play a key role in providing Myanmar’s citizens with credit access and other financial benefits. Myanmar’s growing mobile market can also help strengthen the country’s financial stability, helping more Myanmar residents have access to financial services as well.
– Rhondjé Singh Tanwar