News / Economy

Myanmar Prepares for Return of Foreign Banks

FILE - Employees work at the Central Bank's headquarters in Naypyitaw, Myanmar.
FILE - Employees work at the Central Bank's headquarters in Naypyitaw, Myanmar.
Ron Corben

After more than five decades, foreign banks are set to fully return to Myanmar later this year as part of the government’s policy reforms aimed at developing the economy and infrastructure.

The foreign banks will also provide a key source of funding in a country hungry for capital for development.

Foreign banks that were present in Myanmar, also known as Burma, in 1963 were nationalized after the military took power.

Years of isolation from the international community as well as economic and trade sanctions undermined development of the banking sector.

Since Myanmar's political opening in 2011, about 40 international banks have opened representative offices, offering limited advisory services.

Beginning in September

Central Bank of Myanmar Deputy Governor Set Aung said up to 10 foreign banks will be granted licenses and will be open for limited banking services beginning in September. 

By July 6, a licensing panel, including the Ministry of Finance, Central Bank, Attorney General's Office, representatives from the International Monetary Fund (IMF), and a German consulting team, will complete a review of applications.

The World Bank recommends the new banks have a paid up capital base of $75 million.

Sean Turnell, a professor of economics at Macquarie University in Australia, said, given the lack of development in Myanmar’s banking sector, foreign banks could play a key role in providing much needed capital and access to international trading links.

"What does Myanmar need? What it needs desperately is capital -- it's got none.

"Essentially the banking system that's there at the moment is smaller than one medium-sized bank in the U.S. [So] you need capital. Where are you going to get it? Well you are going to get it from foreign banks - the local banks firstly at the moment are not big enough," Turnell said.

Burma's banking sector remains vastly underdeveloped.

A United Nations report found just 4 percent of the country’s estimated 61 million people have a banking or savings account.

Many rely on "informal banking," including borrowing from so-called loan sharks, with exorbitant interest payments.

Faces challenges

Myanmar is one of the poorest nations in Asia with about 43 percent of people living on less than $2 a day and about 80 percent getting by on $5 a day.

Banking sector development is vital to support the economic reforms but faces challenges due to the lack of progress in recent decades, said Kobsak Pootrakool, an executive vice president at Thailand's Bangkok Bank.

"In the banking sector the main challenges for Myanmar is how to develop their own banking system so they can support the development of its own small medium enterprises (SMEs) and its own local corporate so that later on it will compete with these multinational corporations that are coming into the country," Kobsak said.

Local banks and their supporters tried to derail the reform legislation for fear of competition from the foreign banks. But President Thein Sein resisted the calls, insisting the reforms go ahead.

Macquarie University's Turnell said the local banks are concerned about competing against well-funded international banks, which could also poach their local staff. 

But Turnell said the fears are overplayed.

"The local banks talked themselves into a panic about foreign banks. Most foreign bank lending is going to be to the foreign multinationals anyway," Turnell said. "A lack of a functioning financial sector is being really high on their list of why they don't go ahead and invest. So foreign banks in a sense deliver that. But in doing that they deliver something that the local banks don't do anyway. "

The foreign banks will still face restrictions.

The banks are limited to just one branch offering limited services including loans to foreign corporations. To lend to local companies will require cooperation with local banks.

You May Like

Video Americans, Tourists, Reflect on Meaning of Thanksgiving

VOA garnered opinions from several people soon after November 13 Paris attacks, which colored many of their thoughts

Video Thais Send Security Concerns Down the River

In northern Thailand, the annual tradition of constructing floating baskets to carry away the year’s bad spirits highlights the Loy Krathong festival

Video Tree Houses - A Branch of American Dream

Workshops aimed at teaching people how to build tree houses have become widely popular in America in recent years

This forum has been closed.
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
After Paris Attacks, France Steps Up Fight Against ISi
November 24, 2015 3:04 AM
The November 13 Paris attacks have drawn increased attention to Syria, where many of the suspected perpetrators are said to have received training. French President Francois Hollande is working to build a broad international coalition to defeat Islamic State in Syria and in Iraq. Zlatica Hoke reports.

Video After Paris Attacks, France Steps Up Fight Against IS

The November 13 Paris attacks have drawn increased attention to Syria, where many of the suspected perpetrators are said to have received training. French President Francois Hollande is working to build a broad international coalition to defeat Islamic State in Syria and in Iraq. Zlatica Hoke reports.

Video US, Cambodian Navies Pair Up in Gulf of Thailand

The U.S. Navy has deployed one of its newest and most advanced ships to Cambodia to conduct joint training drills in the Gulf of Thailand. Riding hull-to-hull with Cambodian ships, the seamen of the USS Fort Worth are executing joint-training drills that will help build relations in Southeast Asia. David Boyle reports for VOA from Preah Sihanouk province.

Video Americans Sharpen Focus on Terrorism

Washington will be quieter than usual this week due to the Thanksgiving holiday, even as Americans across the nation register heightened concerns over possible terrorist threats. VOA’s Michael Bowman reports new polling data from ABC News and the Washington Post newspaper show an electorate increasingly focused on security issues after the deadly Islamic State attacks in Paris.

Video World Leaders Head to Paris for Climate Deal

Heads of state from nearly 80 countries are heading to Paris (November 30-December 11) to craft a global climate change agreement. The new accord will replace the Kyoto Protocol on Climate Change that expired in 2012.

Video Uncertain Future for Syrian Refugee Resettlement in Illinois

For the trickle of Syrian refugees finding new homes in the Midwest city of Chicago, the call to end resettlement in many U.S. states is adding another dimension to their long journey fleeing war. Organizations working to help them integrate say the backlash since the Paris attacks is both harming and helping their efforts to provide refugees sanctuary. VOA's Kane Farabaugh reports.

Video Creating Physical Virtual Reality With Tiny Drones

As many computer gamers know, virtual reality is a three-dimensional picture, projected inside special googles. It can fool your brain into thinking the computer world is the real world. But If you try to touch it, it’s not there. Now Canadian researchers say it may be possible to create a physical virtual reality using tiny drones. VOA’s George Putic reports.

Video New American Indian Village Takes Visitors Back in Time

There is precious little opportunity to experience what life was like in the United States before its colonization by European settlers. Now, an American Indian village built in a park outside Washington is taking visitors back in time to experience the way of life of America's indigenous people. Carol Pearson narrates this report from VOA's June Soh.

Video Even With Hometown Liberated, Yazidi Refugees Fear Return

While the northern Iraqi town of Sinjar has been liberated from Islamic State forces, it's not clear whether Yazidi residents who fled the militants will now return home. VOA’s Mahmut Bozarslan talked with Yazidis, a religious and ethnic minority, at a Turkish refugee camp in Diyarbakır. Robert Raffaele narrates his report.

Video Nairobi Tailors Make Pope Francis’ Vestments

To ensure the pope is properly attired during his visit, the Kenya Conference of Catholic Bishops asked the Dolly Craft Sewing Project in the Nairobi slum of Kangemi to make the pope's vestments, the garments he will wear during the various ceremonies. Jill Craig reports.

Video Cross-Border Terrorism Puts Europe’s Passport-Free Travel in Doubt

The fallout from the Islamic State terror attacks in Paris has put the future of Europe’s passport-free travel area, known as the "Schengen Zone," in doubt. Several of the perpetrators were known to intelligence agencies, but were not intercepted. Henry Ridgwell reports from London European ministers are to hold an emergency meeting Friday in Brussels to look at ways of improving security.

Video El Niño Brings Unexpected Fish From Mexico to California

Fish in an unexpected spectrum of sizes, shapes and colors are moving north, through El Niño's warm currents from Mexican waters to the Pacific Ocean off California’s coast. El Nino is the periodic warming of the eastern and central Pacific Ocean. As Faiza Elmasry tells us, this phenomenon thrills scientists and gives anglers the chance of a once-in-a-lifetime big catch. Faith Lapidus narrates.

Video Terrorism in Many Forms Continues to Plague Africa

While the world's attention is on Paris in the wake of Friday night's deadly attacks, terrorism from various sides remains a looming threat in many African countries. Nigerian cities have been targeted this week by attacks many believe were staged by the violent Islamist group Boko Haram. In addition, residents in many regions are forced to flee their homes as they are terrorized by armed militias. Zlatica Hoke reports.

Video Study: Underage Marriage Rate Higher for Females in Pakistan

While attitudes about the societal role of females in Pakistan are evolving, research by child advocacy group Plan International suggests that underage marriage of girls remains a particularly big issue in the country. VOA’s Ayesha Tanzeem reports how such marriages leads to further social problems.

VOA Blogs

World Currencies


Rates may not be current.