By May Thet Hnin
The Central Bank of Myanmar (CBM) has granted permission to 13 foreign banks, who already have branches in the country, to extend their services to local companies, according to a directive issued by the CBM on 8 November.
The move aims to level the field for domestic and foreign banks, and improve access to funds for local companies. According to the new directive, foreign banks will now be allowed to extend financing and other banking services to local corporates.
“The move is to improve access to finance. Funding for businesses is of vital importance in the current economic climate. When the foreign banks were permitted to set up branches, they were given a timeline for when each step is to be accomplished. Therefore, it is time to ease their restrictions,” said U Win Thaw, Director-General of the Governor’s Office of the CBM.
The foreign banks can lend to local businesses, as per the CBM’s interest rates, set according to the Financial Institutions Law 2016. They are only allowed to lend in Myanmar’s currency. The CBM will soon announce the details of other services the banks can now provide.
“We had some time with the foreign bank branches for market analysis and preparation. Similarly, local private banks had time to make themselves more competitive,” said U Win Thaw.
“The banking sector plays a critical role in economic growth. Only a well-developed banking sector can enable the development of our country. This directive aims to boost economic growth, with foreign bank branches investing in domestic financial markets. Both domestic- and foreign-owned banks were given specific timelines for a competitive market,” he added.
U Than Lwin, a senior consultant at the KBZ bank, said the directive does not detail other services foreign banks can now provide.
“If foreign banks are allowed the same rights as domestic banks, we may face difficulties in a competitive market”, he said. “They have financial efficiency with advanced technology, plus better services. But, we do not intend to oppose the lifting of restrictions”, he said.
“It is better if our foreign counterparts are allowed to open banking services gradually, instead of being permitted to offer a full range of financial services. Foreign countries also lift restrictions on such services gradually”, he added.
“At present, domestic businesses are experiencing difficulties due to high interest rates charged by private banks, and securing loans with collateral. This is why we will opt for loans, depending on services offered by the banks”, said U Ye Myint Maung, an exporter.
“Businesses look for unsecured loans and lower interest rates. We will apply for loans after identifying the strengths, regardless of foreign or local banks. We have received loans from foreign banks in other countries. The interest rate is only 2 per cent, while domestic banks set over 11 per cent, and sometimes up to 13 per cent. There is a significant gap between them. This being so, we would like to request the CBM to favour local businessmen while setting interest rates,” he said.
The CBM allowed foreign banks to provide export financing and related banking services for export financing from 8 December 2017.
The 13 foreign bank branches permitted by the CBM to enter the domestic market are the MUFG Bank, Ltd., the Overseas-Chinese Banking Corporation Ltd, the Sumitomo Mitsui Banking Corporation, the United Overseas Bank Limited, the Bangkok Bank Public Company Limited, the Industrial and Commercial Bank of
China, the Malayan Banking Berhad (Maybank), the Mizuho Bank Limited, the Australia and New Zealand Banking Group Limited, The Joint Stock
Commercial Bank for Investment and Development of Vietnam (BIDV), the Shinhan Bank, the E. Sun Commercial Bank Limited, and the State Bank of India.
(Translated by Ei Myat Mon)