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Modern banking and the big leap
Myanmar must make
Business and the money trap
Pay a little, manage your risks

they face many hurdles in obtaining it. “There are only over 50. According to Aye Aye Win. Entrepreneurs lament that although some financial assistance has been given for the development of SMEs. but the numerous conditions laid out for loan applications are delaying the process. Only if an enterprise is registered will it be able to enjoy its rights and benefits. who runs a plastic wares enterprise. you need a business licence. with reasonable interest rates. Hlaing Win said a person needs to have a business licence and become a member of the CDSMED first. if not all. Hlaing Win. but so many don’t qualify for loans simply because they are not registered as businesses Myat Noe Oo O Numerous conditions laid out for loan applications are affecting SMEs.” he said.000 or 90 percent of all enterprises in Myanmar are SMEs and most.000 small and mediumsized enterprises that are registered with our department. Many are just not registering. Translation by San Layy . Although the government and international organisations are collaborating in loan programs for projects under the Central Department of Small and Medium Enterprises Development (CDSMED). it remains tough for SME operators to get the funds. Yee Yee Khaing. according to the department’s rules. feel their growth will be stifled if they continue to be deprived of easy access to business loans. and other banks associated with the project. One key factor is that many are not registered as a business. he added. I can’t simply go and present my properties as mortgage.” Phyo Aung Khaing. I have rented out 20 cars and am not sure how to apply for a licence for this kind of business. said the Japan International Cooperation Agency (JICA) is cooperating with the government to fund SMEs. are griping over the difficulties in sourcing financial support for expansion despite the efforts of relevant agencies to make it possible. was quoted as saying that Myanma Economic Bank. And the process has to be transparent and swift. the pillar of Myanmar’s economy. Over 200. said a systematic loan system.OCTOBER 2016 Business and the money trap SMEs need money to expand. I want all the industries to be registered. Therefore. managing director of the CDSMED. Photo: Staff perators of small and medium enterprises (SMEs). it is difficult to get a complete picture of all of them. which makes it difficult for SMEs. “It’s not convenient to borrow money from the bank. If you want to take a loan from the Small and Medium Industrial Development Bank. is necessary to help SMEs. would give out K30 billion in JICA loans in September for the development of SMEs.2 Banking & Finance SPECIAL SUPPLEMENT . director general of the CDSMED. I have plans to expand my business. a car rental service operator. but am not sure how to do it.

Loans paid out by a bank are money deposited by bank customers. he established the Construction and Housing Development Bank Ltd in 2013 and Shwe Bank in 2016. consumer loans that are not project-related can be given out within a week because of the existence of credit bureaus. As a local banker. Loan disbursement processes are known to have taken two to three months. the banking sector mainly handles cash notes. on their part. once data centres are built. but they are still not able to hand out loans to local businesspeople. W hat kind of policy changes need to be made for the entire banking sector to move forward? The banking sector’s main service is accepting deposits and disbursing business loans to the corporate sector and its other clients. For the sector to move forward. At present. The central Continued on page 6 . In my opinion. Instead of sending bank statements to customers offline by post. Thirteen foreign banks are now providing services here. bankers have to verify whether a borrower is genuine or not.OCTOBER 2016 3 Modern banking and the big leap Myanmar must make Zay Yar Linn U Thein Zaw says the banking sector is growing. Photo: Supplied U Thein Zaw is the executive vice chair of Shwe Bank and was a member of the board of the Central Bank of Myanmar from 2007 to 2010. customers need not be physically present at the bank but can do payment. Some borrowers are so organised that they have their business figures perfectly worked out. also need to make advance preparations to speed things up. I’m not saying all borrowers are like this. In short. If banks adopt ICT for their services. In other countries. when needed. Borrowers. or even if they did it would be a negligible amount.Banking & Finance SPECIAL SUPPLEMENT . By installing direct banking software. A professional banker. No country’s central bank would grant a full-fledged licence to foreign banks immediately after their entry. Cheque images should be sent online to the clearing house to be processed. This is a step-by-step process. he shares his views on banking policies and services. Properties presented as collateral would have been purchased with informal contracts and not officially registered. how do you view this situation? The policy adopted by the Central Bank of Myanmar regarding foreign banks is good and prudent. If a company’s cash flow or balance sheet is not standardised or audited. Realtime account settlement should be implemented by building a banking network between the Central Bank and other banks. In doing so. even with all required documents in hand. it should be sent online to their mobile phones or emails. the Central Bank of Myanmar is starting to work on the required rules and regulations. people could get their loans processed within a week? Credit bureaus facilitate bankers in the prompt disbursement of loans. it would take a banker several more days to do the additional checks. we should use core banking software and servers for storage. Also. individual banks and their branches. Some borrowers would mention in their profile that they are running a profitable business. They have already pooled in their shares. remittance from the convenience of their homes or offices. But when someone makes sure whether they had filed their income taxes or not. it would be found that they did not. banking should be transformed from conventional to one using ICT [information and communications technology]. The host supervisor of a foreign bank coming into this country is the Central Bank of Myanmar. Then. we need to try to substitute physical cash with digital money. Currently. There needs to be an organisation like a credit bureau to do the verification. It also provides other services relating to finance. and the overall economy. it is monitoring how much a foreign bank is compliant and how much it supports Myanmar’s economy before giving it more authority. Banks have come together in making arrangements to have a credit bureau established as a public company. Banks need to know the history of loan applicants. collection. would it take a shorter time for a loan application? This is different. foreign banks are not allowed to accept deposits but permitted to offer loans. The amount of profit mentioned and the tax paid do not match. Myanmar is anticipating a credit bureau soon. In place of calculators and storing bank accounts in physical ledger books. with a credit bureau. In an interview with The Myanmar Times. the ability and credit rating of borrowers. known as physical currency. So.

Tin Yadanar . Zaw Zaw Htwe. Photo: Supplied Executive Editor: Myo Lwin Editor: Clovis Santiago Sub editor: P. As mobile banking apps become more sophisticated and widely available. With it. Myat Noe Oo. please contact c.OCTOBER 2016 Advantages of modern mobile banking AGD Bank managing director U Htoo Htet Tayza at his office in Yangon. Banking systems in any country need to be effective. which is modernising all areas of human activity. The ultimate value is to build a successful ecosystem through mobile banking which can benefit both the banker and the customer. The banking sector has been quick to get on board. and has an impressive 80 percent smartphone usage rate. Vijian Staff writers: Zay Yar Linn. mobile banking presents the perfect opportunity to leapfrog the brick-and-mortar approaches and achieve financial inclusion through smartphones. We are living in an age of information and application. According to research. small and large. Myanmar is the third-fastestgrowing mobile market in the world. The use of mobile banking provides businesses access to financial services beyond working hours and reduces the amount of paperwork for both the banker and the customer. efficient and in touch with technology. Information technology has shrunk the world to the extent that most people readily embrace new technologies. Customers will have a greater opportunity to access financial services on-the-go and it would like having a bank teller on your phone. a customer no longer needs to allocate time to get to a bank to check their bank balance or transfer money. With 90pc of the population currently lacking access to formal financial services. Therefore. At Asia Green Development (AGD) Bank. it provides customers with improved access to the banks’ products and services.santiago@mmtimes. (Htoo Htet Tayza is managing director at Asia Green Development Bank. Zarni Phyo Cover Photo: AFP Art Director: Tin Zaw Htway For feedback and enquiries. which is another way a synergetic relationship can be built with the retail sector. one of which is banking via mobile phone. This can ultimately be seen as a win-win scenario for both the banker and the customer as it gives banks the ability to engage with their customers in real time and get to know customers better in order to proactively offer the right products and services while building relationships. By partnering with SMEs and start-ups. are continuously looking for ways to maximise their profitability and efficiency. which can be timeconsuming. Convenience is a big incentive for businesses to use mobile banking. after India and China. and we believe our core competences in fintech (financial technology) will open doors and foster the growth and development of businesses in Myanmar. and recent innovations in telecommunications have enabled better access to financial services via alternative channels.4 Banking & Finance SPECIAL SUPPLEMENT . banks can offer in-app purchases through their mobile banking applications. Htin Lin Aung Photography: Thiri Lu. financial inclusion and providing banking facilities for local businesses remains our top priority. and businesses. Myanmar isn’t simply mobile ready _ it’s already smartphone ready. Aung Myin Ye Zaw.) AGD Bank on Sule Pagoda Road. The sky is the limit when we look at the advantages mobile banking can bring to businesses in Myanmar. Photo: Supplied Htoo Htet Tayza B anking is an industry now very much focused on technological innovation. Htoo Thant.


but frequently shoppers and diners are hit with this question when they take out their wallets to pay. I presume the new government will implement an inflation-targeting policy.6pc increase. the economy won’t slow down. The income level is a measurement of GDP per capita income. The 13 foreign banks allowed to operate would bring in together about US$1 billion dollars as loanable funds in Myanmar. the waiter whispered to the customers. “Would you want the receipt with or without a tax stamp?” It’s not a question that should be asked. tax collections amounted to K1. Only when the income level is high will the country be rich. the growth rate is higher in Myanmar. whether this figure was achieved or not will only be known when the government reveals the figure. If GDP increases. “Estimated [tax revenue] figures would be close to target. told the parliament last December that although the previous government had implemented policies to collect taxes efficiently. Malaysia’s per capita income is $9766. In other CMLV countries. Foreign banks are superior to us in every way. The reason this country’s growth rate is better than those of the US and Japan is due to the factors of production – land. “One big restaurant in Thapyay- gone does the same. we still have abundant factors of production left to be used.515 trillion or 39. “We are trying to prevent and investigate as much as we can those who are evading taxes. According to the GDP growth rate. banks need to disburse more loans.837 in the US and $37. Per capita income is calculated on an average for a population of 53 million based on the country’s total economic output. GDP is the indicator of a country’s economic progress. it would. Why is it that most people live in poverty although our country’s economy has been steadily growing at 7pc to 8pc annually? We need to find a solution. Looking at the figures.614 trillion – almost five times more than K782 billion recorded in 2013-14. But if we ignore it.6 Banking & Finance SPECIAL SUPPLEMENT . US and Japan are higher. but the inflation rate was 10pc. Here. in technology and experience. Myanmar’s economy will grow due to foreign banks. Vietnam’s income level is $2111. Maybe the restaurant’s “Customers First” motto reflects the owner’s wish not to trouble customers with services tax. labour and capital – being fully employed in the US and Japan.6pc and Japan a 0. told The Myanmar Times this is not the only restaurant where such tax can go unpaid. but rather become higher. Thailand (80pc) and Malaysia (70pc). why most Myanmar people are in poor condition while the country’s economy is improving.922 trillion budget deficit or 4. Of the 53 million. the amount of tax collected. The absence of a tax stamp means both customer and business owner have ignored the law. Myanmar is higher. A foreign bank is allowed to open only one branch and must bring in a minimum investment of US$75 million.66pc deficit-to-GDP ratio in the 2016-17 fiscal year. the growth rate would still be 7pc to 8pc. According to Swe Tint. some weaknesses still existed. but on the other hand. Myo Zaw Aung. During 2014-15. that ratio is only about 15 percent. When Thein Sein’s government took over in 2012 the public was again informed about the country’s income and expenditure. according to the growth rate. while no figures had been revealed in the annual budget since 1988. Once the economy grows. There and then we had to give a short lecture to the waiter. we won’t progress. Next point: If we compete with those who are inferior to us. Translation by Thiri Min Htun fter serving a group of diners at a trendy restaurant in Nay Pyi Taw. But the government should try to set policies so that it would not rise too high.” Poor tax collections added more pain to the exchequer. Why isn’t Myanmar. but according to the income level. former minister of finance. build infrastructure and improve health and education. So. In the 2015-16 fiscal year.888. there will be more opportunities for local banks to carry out their businesses. the government suffered a deficit of K3. most people with low income would face economic hardship. Figures released by the World Bank show Myanmar’s GDP growth rate was 7pc in 2015. Myanmar has a growth rate between 7pc and 8pc a year. It’s not going to be easy to solve the inflation issue in our country.693 trillion in the 2011-12 fiscal year and tripled to K3. based on macroeconomic data. you are right. while Myanmar’s is $1203. lower house NLD MP from Kawlin township. Livestock and Irrigation.372 trillion the following year. and this prodded the government to improve its tax collection system. Under the new government. They asked us whether to charge us without the tax. According to the Joint Public Accounts Committee. It is not easy to set inflation target policies. Most people’s income will increase if a policy balancing income distribution is successfully implemented. while US has seen a 2. However. so that an appropriate amount could be realised. Yes. not as wealthy as the US or Japan? There are two ways of measuring the GDP – the growth rate and the income level. 10pc could be filthy rich while 90pc might be living in absolute poverty.” In general. with a higher GDP growth rate. In Myanmar. tax collections remained low in Myanmar compared to some neighbouring countries where it was as high as 80pc. An interesting paradox to note: Aside from local customers. How much bank loans support a country’s economy is assessed by the bank loans to GDP (gross domestic product) ratio. Hence. but there are still weaknesses in implementing it. wouldn’t it be defying the government’s fiscal policy to collect more tax revenue? A receipt with a tax stamp simply means customers have paid tax for what they have consumed. we should welcome foreign banks coming in. World Bank figures for 2015 show the income of a citizen per year is $55.322 in Japan. It will remain. What is your opinion on the future of Myanmar’s economy under the new government? As everyone knows. For Myanmar’s economy to develop. Thailand’s $5816 and Singapore’s $52. Photo: Aung Myin Ye Zaw Why the people are still facing hardship in spite of high growth Continued from page 3 bank has already issued complete directives regarding loans service. per capita income also increases. Laos’s $1812 and Cambodia’s $1158. Win Shein. The income of a citizen here in 2011 was $824. and the tax revenue-to-GDP ratio. The government could be staring at a K3. and the inflation rate becomes higher than the GDP growth rate.OCTOBER 2016 Confusion still Htoo Thant A Shwe Bank is planning to adopt ICT in all its services. So. the public is clueless on how much tax is collected or what is the ratio of the tax revenue to the gross domestic product (GDP). the income of a citizen has significantly increased. In other ASEAN countries. Local banks will improve by competing with them. If GDP increases.39 percent of the total state income. against Vietnam (90pc). director of the Ministry of Agriculture. but it increased to $1203 in 2015. said two-term parliamentarian Ba Shein from the Arakan National Party. during an election year governments everywhere tend to spend more money to create jobs. we do not see the economic situation of most people improved. But. this restaurant in Nay Pyi Taw is regularly patronised by local lawmakers too. The lower tax revenue contributed to the huge budget deficit during the previous administration. However. tax revenue shot up to K6. How much myanmar banking at a glance . Therefore. won’t per capita income increase? Yes.

K1 million for two school-going children (K500. How much. So.2 million). For example.” The amended 2016 National Budget Law has forecast the income tax revenue as K6. It means the consumer has to pay the liquor tax and for the liquor served. “We already paid our income tax.000 monthly in salary is taxed. If 5pc tax is collected. of the total salary. for example. Photo: Thiri Lu closer it is. However. Deputy minister Maung Maung Win from the Ministry of Planning and Finance described in parliament in September the tax-deducted salary as savings. He said the taxation system is still unclear. Ordinary food stalls. daily wage earners cannot eat at trendy restaurants with their meager pay. Swe Tint said that even a director who earns a little over K300. so that they would want to pay their taxes. 20pc of the salary (K1. When income tax is calculated. But they deduct taxes from our salary. small restaurants do not use tax stamps. Civil sector employees feel the pinch too.” businessman Nay Soe from Pyinmana said. building houses or purchasing cars. and it would be hard for someone drinking a cup of tea to pay that amount of change. but to those in the lower social strata.218 trillion targetted in the original law. we don’t know for sure how many kinds of taxes we have to be paying in total. The estimated revenue from the telephone commercial tax is about K80 billion.OCTOBER 2016 7 reigns in taxation A receipt with a tax stamp _ or many _ simply means customers have paid tax for what they have consumed. for instance.Banking & Finance SPECIAL SUPPLEMENT . and that a person is not required to pay tax again on it when buying real estate properties.000 per month. Although a person need not pay tax again when purchasing or building houses. we’ll get to know only when the government reveals it. He explained. Look at. according to Win Shein. said. for a director general who earns K500. there are also criticisms about the current tax policies. like the entrepreneurs. the tax is K40. collecting tax in those places would not affect low-income earners.219 trillion. upgrade the tax system to international standards. The present government’s tax policies are aimed at addressing some underlying weaknesses: to plug revenue leakages through tax evasion. “It is not correct that low-income earners are burdened with tax. “Let’s say you buy a bottle of beer. he said. government employees say they are still taxed for daily commodities purchased. the taxable amount would be only K2.000 each) would be exempted. “A cup of tea costs only K300. “We also pay tax. It’s true the manufacturer paid the tax. or buying cars. yearly income would be K6 million.” he said. such as funding healthcare and protecting the environment and natural resources.” he added. the telephone commercial tax. K1 million for a spouse.” said Khin San Hlaing. tea shops. “We would collect the tax that should be collected and then there would be transparency in reporting back to the public. Therefore.” he said. be more transparent.000 and the remaining K50. chair of parliament’s Banks and Financial Development Committee. The same is also true in restaurants. I hope the public would also follow rules and regulations. So.000. People who go there are average income earners. Translation by Emoon and Khine Thazin Han . and so we have to pay tax again. In other words. a negligible increase from K6. But when we buy a commodity they stick a stamp on the receipt.” Zaw. a tea shop owner from Pyinmana. We already announced the K7 billion tax revenue would be used for the education sector. I don’t know for sure.8 million with tax amounting to K40.” Myo Zaw Aung said. Many say the taxes are a burden not to the wealthy class. The manufacturer has added the tax to the beer price and people have to be paying it all back. it will cost K315. Money collected will be channelled for prudent usage. and balance economic stability and domestic consumption. Myo Zaw Aung refuted criticisms that low-income earners have to shoulder extra taxes when buying goods and food. How are they going to collect K15? No one holds that kind of change anymore.6 million would be savings. “This government has already proclaimed that there would be no corruption and tax revenues would be used for public interest. but they give out that tax money only for a short period because they will be getting it back from the customer.

auto clearance system and auto payment system. some sectors. and innovative banking products and services could serve well for local banks. If they are allowed to provide the same services. Also. internet banking and mobile banking should be introduced in areas where it is not feasible to open new branches. There are still weaknesses in the current Electronic Telecommunications Law. there is limitation for entrepreneurs to receive enough loans. introducing mobile banking. including banking. Local banks can expand interbank lending with foreign banks and in turn lend money to local businesspeople at a lower interest rate. mobile banking. To be able to fully grasp these opportunities and prospects. due to the lifting of the US sanctions. including private. Photo: Supplied Any additional service in the pipeline for your banking customers? UAB is providing services with an aim to be the leading customer-centric bank. once the regulatory and management roles of the Central Bank becomes stronger and local banks are stable and robust. Besides. For more effective customer banking services in 201617. These need to be done within six months or a year. Banks also need to use a centralised banking system to transmit data that the Central Bank needs in time. To encourage more people to use banks. Our neighbours have big consumer markets. Though a credit bureau has been formed. Although Myanmar had had good policies under successive governments. start using a centralised banking system. Currently. rising foreign competition and the country’s economic potential Zay Yar Linn W hat kind of policy changes need to be made for the entire banking sector to move forward? The financial sector. it would be necessary to develop the capital market as the country progresses. Moreover. An important factor for a stable banking sector is to curb rumours. social organisations and the country as a whole would greatly benefit. internet banking. there is a heightened interest from the business community in the US and other countries to invest in Myanmar. It’s also necessary to have a credit bureau or a credit information system. Instead. To build trust. I think most local banks would welcome the arrival of foreign banks here. the arrival of foreign banks in Myanmar with their low interest rate. we have to be always on the lookout to produce local experts. Therefore. we are expanding our services by installing more ATMs. including banking operations. for stable and systematic expansion of banking activities. we are providing an SMS alert service on their mobile phones for withdrawals. We conduct customer service trainings to our staff to ensure our customers are satisfied with our services. CEO of United Amara Bank. besides bank branches and automated teller machines [ATMs]. it’s still high compared to international interest rates. I think the entire banking sector will benefit if the foreign banks’ current status is maintained and gradually allowed to expand. a real-time electronic reporting system between banks and the Central Bank is needed. the rate could be in line with international countries. We also provide point-of-sale services that would accept international credit cards and Myanmar Payment Union cards. we need to improve electricity supply. disbursing various kinds of business loans and carrying out international banking services. for trade facilities. Only foreign entrepreneurs can borrow from them. They advise that the international financing report standard (IFRS) be used when providing statistics to international monetary organisations and to the Central Bank. is the backbone of the nation’s economy. along with Myanmar citizens’ stronger desire to cooperate with the elected democratic government. For banking institutions to be efficient. It has been suggested that foreign banks should be gradually allowed to expand their operations in the country only when it’s certain that the local banking sector is stable and strong. have absolute efficiency in financial institutions and have skilled human resources. transfers and deposits. There is a delay since huge amounts of physical currency has to be handled and painstakingly counted in dealings between individual banks and the central bank. Through stable financial institutions. Moreover. then people would start moving their money saved in local banks to foreign banks. it is important to choose the right technologies on the advice of foreign professionals. Only with a credit information system Launching of a new UAB branch. we have introduced good corporate governance and implemented the IFRS. banks can serve every citizen. Although the present collateral-based loans produce good results. Another problem we face is the scarcity of skilled human resources. rumours that have an impact on political. we need to bridge the gap in infrastructure. Win Thaw Tar and Thiri Min Htun . Translation by San Layy. for a successful implementation. Legal action should be taken against those who intentionally disseminate rumours through social media. Otherwise. Only if there were progress in this sector would there be national economic development. it is vital that a cheque clearing or an interbank electronic payment system be implemented instead. including banking and other businesses. It is providing innovative deposit products for customers of different age groups. are the existence of stable financial institutions. How do local banks see their foreign counterparts entering Myanmar? I think local businessmen want to borrow money directly from foreign banks so that they can receive their complete services. it could hamper operations despite the huge investments. resulting in the correct and proportionate combination of financial instruments and financial markets. individuals. and these factors are good economic opportunities for us. The three main factors for the financial sector’s progress. with equal regulations to create a banking sector that would develop in a more balanced manner and compete with each other on the same playing field. issuing local and international credit cards. so far they are not able to offer loans to local entrepreneurs. and establish efficient institutions. For the development of the banking sector. Loans to local entrepreneurs can be granted only through local banks. before an appropriate time. foreign banks are not permitted to accept deposits from Myanmar citizens. licensed foreign banks are not permitted to offer direct loans to local business people. We have successfully adopted a fully centralised core banking system that helps customers access our services from ATMs and internet banking any time from any UAB branches. economic and religious sectors spread like wildfire via these media. the banking businesses should cooperate among themselves and adopt good corporate governance. I think Myanmar’s economy will pick up in 2017 if it can bridge the gaps in time to be able to make good use of the economic opportunities. At present. Your comments on Myanmar’s economic prospects for 2017? Along with democratic reforms. Also. including state-owned. we are adopting ICT at every stage of our processes. Besides. negotiate for cheaper interest rates for trade facilities and help local entrepreneurs in international trading. Myanmar’s new government has already set its 12-point economic policy. transportation. by opening up branches. At present. thus creating a monetary crisis leading to the collapse of the local financial sector. To gain the public’s trust. adversely affecting the interests of the country. Photo: Staff will it be easier for an unsecured lending service. Even though private banks in Myanmar have started using ICT. These services strengthen their bank account security. although the lending interest rate of foreign banks to local banks is cheaper than the rates of local banks. There is a need for the emergence of a credit bureau and a corporate credit guarantee scheme for the development of small and medium-sized enterprises. Some examples are a centralised core banking system.OCTOBER 2016 People-friendly services UAB’s priority Bank CEO U Thein Lwin speaks candidly about modernising the banking sector. In order to stabilise the banking sector and enhance the Central Bank’s supervisory and regulatory roles in time. These flaws should be tackled with the assistance of international or local experts. Despite foreign banks making plans to open branches or already being present in Myanmar. and international prepaid cards. That’s why you can be very optimistic about Myanmar’s economic prospects in 2017. Relevant businesspeople need to make changes in advance regarding their business management so that the private sector can develop and compete with foreign enterprises. only 5 percent of the adult population in Myanmar use banking services. set perfect laws and regulations. banks need to adopt innovative information and communications technology [ICT]. new management techniques. we are located in a strategic location in the region. This could be achieved only if member banks. U Thein Lwin. It is necessary to motivate private and state-owned banks to embrace ICT to develop their banking operations. launching more bank outlets. the availability of innovative financial instruments and the emergence of deep financial markets. did not gain success because of the weaknesses in carrying out the policies. it is necessary to improve the effectiveness of banking organisations to ensure their stability and that their services reach every citizen. they are still not capable of providing comprehensive quality services due to lack of infrastructure. With political stability and withdrawal of the US sanctions. the cost of transactions is high because most banking services are just about withdrawals and deposits. Particularly. Interbank lending is still not widely used. Matters important to the country’s economy and the people should be given priority when implementing projects. They also point out that there are some risks attached to these advantages. As the number of social media users are increasing in Myanmar.8 Banking & Finance SPECIAL SUPPLEMENT . According to some experts. its main challenge is to receive exact customers’ data in real time from member banks using modern ICT. This is because of the designated rate for “country risk”. I guess. It is impossible to permanently rely on foreign professionals. I also think state-run banks should be on a par with the private financial institutions and come under the Central Bank’s supervision. According to available statistics.

” he added. we don’t need to worry as much if any accident happens. There has been a gradual increase in customers over the three years since private insurance companies started operations here. Monywa and Pyay. there has been an uptick in the industry as the domestic economy matures and industry policies are relaxed. The fee is not much. where a person’s risk is transferred to an insurance company by paying a certain amount of premium. money is compensated to replace these losses. life. car and snakebites. so facts and knowledge about insurance should be widely disseminated. The change in demography and rising per capita income is expected to further stimulate the underpenetrated sector. In other countries.000. under the Ministry of Planning and Finance’s Insurance Business Supervisory Board. if a driver knocks down a person. who are then given local and international trainings to enhance their talents. said Myo Min Thu. according to industry observers. There are over 40 different insurance policies at Myanma Insurance. Mawlamyine. As for company coverage. manage your risks Insurance is seen as a sunrise industry. He said insurance means providing financial compensation for a specified loss and the insurance business is a risk transfer mechanism. “Our family has automobile and health insurance. “Only a few are insured because Myanmar people think it’s not a good omen to be thinking about occupational hazards even before a business has started and they also don’t trust in insurance companies to pay them compensation. According to state-owned Myanma Insurance. as in developed countries. “When foreign investors come here.” First National Insurance (FNI) deputy managing director Aung Ko Ko Tin Win said insurance is a necessity. together with the progress of the banking sector. University lecturer Thidar Aye. To position itself more strongly in the market. all types of treatment can be covered by an insurance company and we do not need to worry about medical expenses. and so it’s indeed beneficial to the insurer. “There are over 6000 cars insured with Myanma Insurance and over 60. who has health insurance. Than Zaw concurs. including insurance for fire. If something of a large value is lost. according to RTAD regulations. Translation by Khine Thazin Han . still at an infancy stage. which is another factor. Managing director Myo Min Thu of Ayeyar Myanmar Insurance (AMI) said the company will adopt the latest technologies to improve its services and build customers’ confidence. “Right now. like fire insurance. the compensation would be huge. When compared to Western countries. a small business entrepreneur. Besides promoting public awareness on the importance of insurance. to be insured.” But existing guidelines do not favour industry players as well.000 automobiles registered with the Road Transport Administration Department [RTAD]. It is also trying to create greater public awareness on the need for insurance.” said Than Zaw. said. only get it to qualify for bank loans. However. said Than Zaw. compensation has to be paid to the victim. the culture of buying insurance policies has not really caught up in Myanmar.000 with six other private insurance companies.” said Aye Min Thein. “When lives. We would also want to have other insurance if they are suitable for us. said. staff should have life insurance but only a few are insured. owners are buying protection against damages and losses that could occur. they insure all their businesses. businesses or properties are damaged or lost due to various reasons. FNI’s head office is in Yangon and it has branches in Mandalay. In some countries. meaning over 700. Lack of awareness about insurance coverage and social taboos continue to hinder the industry’s growth.” CB Insurance’s administrative director Thaung Han said. in major cities nationwide AMI actively participates in natural disaster relief and rehabilitation works. but in Myanmar no such law exists yet.” Aung Thein. AMI is planning to link up with a Sri Lankan company in the coming fiscal year to initiate an IT-based system. he said. There are about 800. Myanma Insurance’s administrative director. according to insurance experts.” He said by buying insurance policies. such as those in the construction sector.000 to K5 million. Since 2012.” The FNI. is beginning to see some increase in consumers’ appetite for financial security. I only have my health insurance that covers specific medical costs and not all of them. By paying a premium from K1000 to K50. a worker injured in an accident can receive compensation of K100. there is a mandatory requirement for car insurance. but private companies can only promote 12 types to the public. Once we have them.Banking & Finance SPECIAL SUPPLEMENT . is providing insurance services for risk management. The premium fee would be only 1pc of the real value and it would not be a burden to customers. The premium fee is very small. about 12 private insurance companies have begun operations. Not many small businesses have insurance and those who do have a policy. health. the company is hiring experienced staff and younger employees. Myanmar’s population is already hitting 53 million and young people account for about 28 percent of that figure. “In Myanmar’s developing economy. general manager of International Kanbawza Insurance Co Ltd’s claims department. Experts say there should be a wider use of insurance services and some of it should be made mandatory. but there are hurdles to overcome – and public awareness is just one of them Tin Yadanar Tun M yanmar’s insurance industry. Insurance services entered this country later compared to other countries. it is very important to protect public businesses and properties. We need to expand [to include] these kinds of insurance and service in this country. the number of cars insured with the company and other private firms have not even reached 10 percent of the total number of automobiles in Myanmar. “You can have insurance for all kinds of employees. “Myanmar people don’t exactly know the advantages of insurance coverage.OCTOBER 2016 9 Pay a little.000 uninsured cars ply the roads compared to less than 10pc insured. While insurance coverage figures are still dismal. It would be practical for blue-collar workers.

not only stores and markets are crowded with people but even pawnshops draw customers who queue to obtain small loans. 22 authorised An authorised pawnshop at a suburb in Yangon. It means banks have to make sure that buyers can regularly repay their monthly instalments until the loans are paid in full. after the drawing of lots. most of all. people still frequent informal moneylenders daily. people who don’t own any valuables or jewellery tend to rely on informal moneylenders. and about 10 new customers walk in every day. Photo: Zaw Zaw Htwe pawnshops are operating across Hlaing Tharyar township. on average. A staff at a licensed pawnshop in Hlaing Tharyar township. Translation by Win Thaw Tar and San Layy Still the people’s bankers Zaw Zaw Htwe T he pawnshop. Over 4000 people had CHDB housing savings accounts as of early September. as the informal banking system provides easy access to credit. let’s say. it is able to deal in long-term loans. It’s one thing to say low-cost apartments built by the government should be in the hands of those who really need them. even renting one can be troublesome to most families. If anything. Even affordable schemes. which indicate there is pressing need for a formal microfinancing system to relieve people of their financial anxieties. those who are left out this time will always get a chance again whenever there are more apartments available. Banks. in Dagon Seikkan. the initial down payment is more than K3. Some argue they fleece poor customers by charging high rates and valuables will be lost if a person fails to repay loans. The present apartment could be handed back to the DUHD and our bank would be ready to lend extra money for the other apartment. State-owned pawnshops were first introduced in 1952 in Myanmar and later licensed private pawnbrokers continued to provide express loans. continues to thrive as Myanmar strives to modernise itself. An initial capital of K100 million is needed to set up a licensed pawnshop and these businesses pay tax. adding that eventually they would be in an even better position to buy a home once they win a draw “if they keep saving. “We have to pay at least 10 percent interest to informal moneylenders. in accordance with the Myanmar Companies and Myanmar Currency Acts. But at pawnshops.” Those who can afford it can also upgrade to more pricey homes through a CHDB housing savings account. Win Zaw said. There is no regulation on how much can be saved or when to stop saving. you have to pay high interest rates.” added the welder. but then their income grows and they want to move into a K20 million unit.” If borrowers have difficulty redeeming their collateral on the due date. the interest is just 3pc if we leave some kind of jewellery. we lend money by calculating based on the prevailing gold price. Once the necessary initial instalment is deposited. Name lists of people with housing savings accounts would be sent regularly to the Department of Urban and Housing Development [DUHD] which would in turn be CHD Bank supports the development of housing. K5 million”. He said there should be more authorised pawnshops that charge moderate interest rates to meet the demands of people in dire need of cash. That means everyone can definitely own an apartment some day. no thanks to rising demand. the demand for low-cost apartments will only increase. especially to low-income earners. the lowprofile neighbourhood pawnbroker remains a valuable financer. from precious jewellery to watches to expensive clothing. If a person wants to buy an apartment costing. In a country where mobile banking and other banking instruments are making an appearance. “We have made an announcement regarding the opening of housing savings accounts. “Financial investment that the rural population needs must be provided through microfinance in order to reach the rural areas. each costing under K10 million. said they charge 3pc interest if lenders pawn gold. the lack of infrastructure and. That would mean they wouldn’t need such a big loan. and if their account reaches.” Win Zaw said. between K7 million and K9 million a day to customers. “If the collateral is gold. received its official licence from the Central Bank to carry out its banking business in 2013. Most families lucky enough to win a chance to buy a home. Microfinance institutions must be made legal. Yet. We can pay interest once in three months until we save enough money to redeem our things. for instance.” More than 2000 apartments in three lowpriced Shwe Lin Ban housing projects in Yuzana and Kanaung and Hlaing Tharyar township will be on for sale soon. Every morning in Yangon suburbs like Hlaing Tharyar. a better life and shelter. that person will have to pay around K3. with little paperwork and low interest rates. which came to power in April. managed by the Ministry of Construction. then president Thein Sein said. CHDB managing director Win Zaw told The Myanmar Times. This bank would not have any reason to double-check if buyers’ savings cover the amount of the first instalment. for a short span of time in exchange for fast cash to bridge financial shortfalls. Even then. Customers who have a housing savings account with CHDB would pay the usual bank interest rates.” Win Zaw said. while others say these lenders are part of the informal banking system who are ready to provide instant cash to the needy. they could also face a big loss if a borrower disappears without repaying the debt. “I prefer pawnshops and wish there would be more of them. who did not want to be named.” he said. there are a lot of people struggling with higher living costs and borrow from both pawnshops and informal lenders. There is some guarantee in borrowing from pawnshops and interest is also low. “Someone might be currently living in a K10 million apartment. minus the bureaucracy. Though lenders make huge profits.5 million or 30 percent of the total price and the rest is paid in monthly instalments over eight years. so both the government and lenders benefit from their services. will only offer loans to people who can definitely repay them. has announced plans to build 200. To Hla Htay. Translation by Zar Zar Soe . especially in Yangon. as a development bank rather than a commercial institution set up to finance housing development. We want them to pay it through their bank savings here.5 million to K4 million as a down payment. Affordable apartments currently cost at least K10 million. If there are 10 persons on the list qualified to participate. people can now open CHDB housing savings accounts that would give them a long-term guarantee of house ownership. Hlaing Tharyar and Thanlyin townships.000 lowcost apartments to try to meet demand.OCTOBER 2016 Your dream home through CHDB There are advantages to draw upon when one opens a housing savings account with the bank Zay Yar Linn L et alone pursuing one’s dream of owning a house or an apartment in Yangon. “This is a way of building confidence between the bank and the apartment buyer. naturally. The bank supports the development of housing. At present. One advantage CHDB has over other banks is that. cannot afford to pay the sizeable initial payment. K10 million. Enter Construction and Housing Development Bank Ltd (CHDB). He said.000 people migrate to Yangon seeking work. the monthly amount to be paid back would be smaller. so many prefer pawnshops which charge K3 interest if gold is pawned. For example. if the market price is K600. which helps him to operate his business. first introduced by the previous government and quite popular with many wishing to own apartments. Since this money lending business is not authorised. Similarly. he said. But pawnbrokers said they too are vulnerable to risk. they would be placed in housing which has already been built. People hock their valuables. insufficient financial resources. when the collateral happens to be stolen goods or fake materials deposited by unscrupulous customers. and between 5pc and 10pc if it’s clothing or other items. The National League for Democracy government. pawnshops give a grace period of 10 days. a traditional micro-financing model. chair of Hlaing Tharyar’s National Democratic Force.” CHDB. the pawnshop is his financial lifeline. who charge hefty interest rates calculated on a daily basis – at least 10pc to 20pc for every K100. “If you borrow from informal moneylenders. “I do not want buyers who can afford the down payment and yet do not win the lucky draw to be discouraged. Priority will be given to those who have the first instalment of 30pc in savings. “People should open a housing savings account at our bank.” Financial experts continue to debate the pros and cons of pawnbrokers.000 per tical [16. and whether they can repay the bank every month for eight more years.Banking & Finance 10 SPECIAL SUPPLEMENT .000. the only bank that has the Ministry of Construction’s backing. limited land space. I want people to save as much money as they can. “If the loan is smaller. a Hlaing Tharyarbased welding workshop owner. for example. filling the needs of families desperate for cash. Currently. there is no guarantee for both lender and borrower. Photo: Zarni Phyo monitoring their accounts to call in those who have enough down payments to participate in the lot drawing for an apartment. working to build trust and confidence with the public and ensure lowcost housing goes to families who deserve it. so there’s no need to worry about losing your valuables. we give out a loan of about K550. tenders are open to build 8000 apartments. To those ends. Every year about 300. can be out of reach. With a CHDB housing account. but in reality there are complications in the step-bystep documentation and bank scrutinisation processes regarding mortgage and payment. One authorised pawnshop that has been operating for the past six years lends. DUHD director general Min Htein said.” said Myint Thein. borrowers who invest these loans in their small businesses would be mired in debt for a long time if their incomes aren’t even enough to service their loans. Pawnshops are very useful to us. However.4 grams]. At the opening ceremony of the national-level workshop on rural development and poverty reduction held in 2011. and if there are only five apartments.

the trading could stall resulting in plummeting share prices. These facts are published on the YSX and the respective company’s website. you lose your money. Stock prices rose due to the buying sprees in the early weeks as bullish investors entered the market. as investors could lose money in a short span of time while smart investors earn millions in hours or days. it would be like gambling and there would be higher risks. In that regard. If shares are bought when prices are rising. say experts. In fact. Expert Investment Securities. the poor performance of the Yangon Stock Exchange (YSX).000 in May. they can decide about their own investments. FMI’s share price was K36. “Long-term investment would be the best for share traders. So. say experts. advised the public to clearly understand the background of the company. It is also planning to open its own training school for the public. Long-term traders are in a better position. share prices of two companies listed on the YSX are in the red. had earlier cautioned the public to learn how to trade shares and have sufficient knowledge about the stock market and the public companies in which they were investing. The licensed training centres are MIND Investment Institute. and the nature of their business. MCB shares prices have risen from the initial K6800 per share to K8200. especially their financial Three companies have listed so far on the Yangon Stock Exchange since it officially opened in March. You can’t say for sure if you would make a profit just by buying a share. Myanmar Thilawa SEZ Holdings (MTSH) and Myanmar Citizens Bank (MCB). “Placing shares on market price means trading at whatever price comes on the market.000. If they are investing for the short term. the kind of order and the number of shares placed. It can be a volatile business. That’s why share trading should be a long-term investment. said at the company’s 24th anniversary celebration. The document also outlines the company’s management board. He also advised investors to choose the right securities company with which to do their trading. investors need to make the right decision when placing their shares. You need to be aware of that. Similarly. For instance. capital assets. subsequently touching nearly K70. who was involved in the setting up of YSX. But in September its price slumped to K17. There was shortlived euphoria in the bourse when the listings took place. “When you buy a share. Myanmar Institute of Finance. and current and future projects. which officially opened for trading in March some two decades after it was first conceived. many shifting away from the traditional over-the-counter trading.. YSX manager Thet Tun Oo said that immediately after the establishment of the stock market. Translation by Kyawt Darly Linn and Thiri Min Htun . many staying only for short-term gains. Companies listed on the stock exchange need to release a “disclosure document” to the public including how their companies are managed and details on their financial status. before deciding to invest.” he told The Myanmar Times. Shenton Institute of Applied Finance. KTZ Ruby Hill Securities. Photo: AFP status such as profit and loss. the Security Exchange Supervisory Commission (SECM) has granted permission to the following companies to engage in securities trading: AYA Trust Securities Company. IMA Institute of Accounting & Finance.000 when first listed and rose to about K50.OCTOBER 2016 11 The ups and downs of stock market trading With many new to the game. an economist and former economic adviser to the president. But the tide turned in late June when there was sharp decline in stock prices after nervy investors started to pull out their funds. Aung Tun Thet. MTSH’s shares traded at K55. Therefore.000. spending and expenditure. Depending on demand and supply. In this way. MyAsia Consulting Co Ltd & Infra Partner IMCM. There have been glitches on the way too. chair of First Myanmar Investment Ltd. MCB chair U Toe Aung Myint previously said. stock market trading is not for the faint-hearted. They offer a wide range of programs in share trading. “Share buyers can learn details about our company in the disclosure document. At the moment. the first thing to do is to gain knowledge before even a single kyat is invested Htin Lin Aung I nvesting in the stock market is not child’s play. If their business makes profits. Amara Securities and Union Trust Securities Company. If their business fails. KBZ Stirling Coleman Securities.. Myanmar Certified Training Centers Co Ltd. They said those who wished to invest in shares should have a clear understanding of how the market works before putting in their money. he said. However. capital investments. understanding financial management and the international monetary market. Last month its share price dived to K41. A stock exchange has a market price and a limit price. revealed that local investors still lack acumen in stock trading. Authorities are taking precautions to prevent ill-informed investors from losing their savings in the stock market. you give your money to the company to invest in their business. For instance. sharpening investment skills. Aung Myint Mo Min Securities. It is a tricky business and only those with knowledge should dare trade in stocks.” U Thein Wai.Banking & Finance SPECIAL SUPPLEMENT . Investors can place their shares in either way. The latter is easily exposed to losses when there is a sudden fluctuation in the market. Global World Securities. Local economists and entrepreneurs were quick to point out that the market suffered because the investors were not well acquainted with the functioning of the stock market. Certainly. Global Institute of Finance and Myanmar Institute of Business.000 when listed. The stock market price depends on demand and supply. three companies have listed on the YSX. it means a transaction would be made only when the price matches your expectation. compared to those who trade shares for short- term gains. Myanmar Securities Exchange Center. stock traders were badly hit due to the incorrect input of the shares list. you get profits. you could face losses . At present. So far. CB Bank Securities. [the investor] thinking that prices will rise and expecting high profits later.” Maung Maung Thein. it is important to decide what order and what price to place. the SECM has granted permission to eight training schools to conduct stock market trading courses and is in the process of granting the ninth licence.000 in May. namely First Myanmar Investments (FMI). If you place shares on limit price.” Aung Tun Thet said in a seminar on public companies organised by the Union of Myanmar Federation of Chambers of Commerce and Industries [UMFCCI] in July.