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Banking & Finance SPECIAL SUPPLEMENT - OCTOBER 2016 Modernbankingandthebigleap Myanmarmustmake
Banking &


2 B a n k i n g & F i n a n c e

Banking & Finance


Business and the money trap

SUPPLEMENT - OCTOBER 2016 Business and the money trap Numerous conditions laid out for loan applications

Numerous conditions laid out for loan applications are affecting SMEs. Photo: Staff

SMEs need money to expand, but so many don’t qualify for loans simply because they are not registered as businesses

Myat Noe oo

O perators of small and medium enterprises (SMEs),

the pillar of Myanmar’s economy, are griping over

the difficulties in sourcing financial support for

expansion despite the efforts of relevant agencies to make it possible. Over 200,000 or 90 percent of all enterprises in Myanmar are SMEs and most, if not all, feel their growth will be stifled if they continue to be deprived of easy access to business loans. Entrepreneurs lament that although some financial assistance has been given for the development of SMEs, they face many hurdles in obtaining it. One key factor is that many are not registered as a business. Hlaing Win, a car rental service operator, said the Japan International Cooperation Agency (JICA) is cooperating with the government to fund SMEs, but the numerous conditions laid out for loan applications are delaying the process, 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, you need a business licence. I have rented out 20 cars and am not sure how to apply for a licence for this kind of business. I can’t simply go and present my properties as mortgage. I have plans to expand

my business, but am not sure how to do it,” he said. 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. Hlaing Win said a person needs to have a business licence and become a member of the CDSMED first, according to the department’s rules. Yee Yee Khaing, managing director of the CDSMED, was quoted as saying that Myanma Economic Bank, and other banks associated with the project, would give out K30 billion in JICA loans in September for the development of SMEs. According to Aye Aye Win, director general of the CDSMED, “There are only over 50,000 small and medium- sized enterprises that are registered with our department. Many are just not registering. Therefore, it is difficult to get a complete picture of all of them. I want all the industries to be registered. Only if an enterprise is registered will it be able to enjoy its rights and benefits.” Phyo Aung Khaing, who runs a plastic wares enterprise, said a systematic loan system, with reasonable interest rates, is necessary to help SMEs. And the process has to be

transparent and swift, he added.

rates, is necessary to help SMEs. And the process has to be transparent and swift, he

Translation by San Layy

rates, is necessary to help SMEs. And the process has to be transparent and swift, he
B a n k i n g & F i n a n c e

Banking & Finance



F i n a n c e SPECIAL SUPPLEMENT - OCTOBER 2016 3 U Thein Zaw

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. A professional

banker, he established the Construction and Housing Development Bank Ltd

in 2013 and Shwe Bank in

2016. In an interview with

The Myanmar Times, he

shares his views on banking policies and services, and the overall economy.

Modern banking and the big leap Myanmar must make

Zay yar LiNN

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 disburs-

ing business loans to the corporate sector and its other clients, when needed. It also provides other ser- vices relating to finance. In doing so, the banking sector mainly handles cash notes, known as physical currency. For the sector to move forward, we need to try to substitute physical cash with digital money. In place of calculators and storing bank accounts in physical ledger books, we should use core banking software and servers for storage, once data centres are built. By installing direct banking software, customers need not be physically present at the bank but can do pay- ment, collection, remittance from the convenience of their homes or offices. Instead of sending bank

statements to customers offline by post, it should be sent online to their mobile phones or emails. Real- time account settlement should be

implemented by building a banking network between the Central Bank and other banks, individual banks and their branches. Cheque images should be sent online to the clear- ing house to be processed. In short, banking should be transformed from conventional to one using ICT [information and communications technology].

Loan disbursement processes are known to have taken two to three months, even with all required documents in hand. If banks adopt ICT for their services, would it take a shorter time for a loan application? This is different. Loans paid out by a bank are money deposited by bank customers. So, bankers have to veri- fy whether a borrower is genuine or not. Banks need to know the history of loan applicants. Also, the ability and credit rating of borrowers. There needs to be an organisation like a credit bureau to do the verification. In other countries, consumer loans that are not project-related can be given out within a week because of the existence of credit bureaus. Myanmar is anticipating a credit

bureau soon. Banks have come together in making arrangements to have a credit bureau established as a public company. They have al- ready pooled in their shares. At pres- ent, the Central Bank of Myanmar is starting to work on the required rules and regulations.

Then, with a credit bureau, people could get their loans processed within a week? Credit bureaus facilitate bankers in the prompt disbursement of loans. Borrowers, on their part, also need to make advance preparations to speed things up. Some borrowers would mention in their profile that they are running a profitable busi- ness. But when someone makes sure whether they had filed their income taxes or not, it would be found that they did not, or even if they did it would be a negligible amount. The amount of profit mentioned and the tax paid do not match. Properties presented as col- lateral would have been purchased with informal contracts and not officially registered. If a company’s cash flow or balance sheet is not standardised or audited, it would

take a banker several more days to do the additional checks. I’m not saying all borrowers are like this. Some borrowers are so organised that they have their business fig- ures perfectly worked out.

Thirteen foreign banks are now providing services here, but they are still not able to hand out loans to local businesspeople. As a local banker, how do you view this situation? The policy adopted by the Central Bank of Myanmar regarding for-

eign banks is good and prudent. No country’s central bank would grant

a full-fledged licence to foreign

banks immediately after their en-

try. This is a step-by-step process. The host supervisor of a foreign bank coming into this country is the Central Bank of Myanmar. In my opinion, it is monitoring how much a foreign bank is compli- ant and how much it supports Myanmar’s economy before giving

it more authority.

Currently, foreign banks are not allowed to accept deposits but per- mitted to offer loans. The central

Continued on page 6

foreign banks are not allowed to accept deposits but per- mitted to offer loans. The central


4 B a n k i n g & F i n a n c e

Banking & Finance


Advantages of modern mobile banking

- OCTOBER 2016 Advantages of modern mobile banking AGD Bank managing director U Htoo Htet Tayza

AGD Bank managing director U Htoo Htet Tayza at his office in Yangon. Photo: Supplied

Htoo Htet tayZa

B anking is an industry now very much focused on technological innovation. Banking systems in any country need to be effective, efficient and in

touch with technology, which is modernising all areas of human activity. Information technology has shrunk the world to the extent that most people readily embrace new technologies. The banking sector has been quick to get on board, and recent innovations in telecommunications have enabled better access to financial services via alternative channels, one of which is banking via mobile phone. According to research, Myanmar is the third-fastest- growing mobile market in the world, after India and China, and has an impressive 80 percent smartphone usage rate. Therefore, Myanmar isn’t simply mobile ready _ it’s already smartphone ready. The sky is the limit when we look at the advantages mobile banking can bring to businesses in Myanmar. With 90pc of the population currently lacking access to formal financial services, 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, and businesses, small and large, are continuously looking for ways to maximise their profitability and efficiency. 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. Convenience is a big incentive for businesses to use mobile banking. With it, a customer no longer needs to allocate time to get to a bank to check their bank balance or transfer money, which can be time- consuming. As mobile banking apps become more sophisticated and widely available, it provides customers with improved access to the banks’ products and services. Customers will have a greater opportunity to access financial services on-the-go and it would like having a bank teller on your 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, banks can offer in-app purchases through their mobile banking applications, which is another way a synergetic relationship can be built with the retail sector. The ultimate value is to build a successful ecosystem through mobile banking which can benefit both the banker and the customer. At Asia Green Development (AGD) Bank, financial inclusion and providing banking facilities for local businesses remains our top priority, and we believe our core competences in fintech (financial technology) will open doors and foster the growth and development of

businesses in Myanmar.

foster the growth and development of businesses in Myanmar. (Htoo Htet Tayza is managing director at

(Htoo Htet Tayza is managing director at Asia Green Development Bank.)

Tayza is managing director at Asia Green Development Bank.) AGD Bank on Sule Pagoda Road. Photo:

AGD Bank on Sule Pagoda Road. Photo: Supplied

Executive Editor: Myo Lwin

Editor: Clovis Santiago

Sub editor: P. Vijian

Staff writers: Zay Yar Linn, Htoo Thant, Myat Noe Oo, Tin Yadanar Tun, Zaw Zaw Htwe, Htin Lin Aung

Photography: Thiri Lu,

Aung Myin Ye Zaw, Zarni Phyo

Cover Photo: AFP Art Director: Tin Zaw Htway

For feedback and enquiries, please contact

Cover Photo: AFP Art Director: Tin Zaw Htway For feedback and enquiries, please contact


6 B a n k i n g & F i n a n c e

Banking & Finance


F i n a n c e SPECIAL SUPPLEMENT - OCTOBER 2016 Shwe Bank is planning

Shwe Bank is planning to adopt ICT in all its services. 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. How much bank loans support a country’s economy is assessed by the bank loans to GDP (gross domestic product) ratio. In Myanmar, that ratio is only about 15 percent, against Viet- nam (90pc), Thailand (80pc) and Malaysia (70pc). For Myanmar’s economy to develop, banks need to disburse more loans. A foreign bank is allowed to open only one branch and must bring in a mini- mum investment of US$75 million. The 13 foreign banks allowed to operate would bring in together about US$1 billion dollars as loan- able funds in Myanmar. Myanmar’s economy will grow due to foreign banks. Once the economy grows, there will be more opportunities for local banks to carry out their businesses. Next point: If we com- pete with those who are inferior to us, we won’t progress. Foreign banks are superior to us in every way, in technology and experi- ence. Local banks will improve by competing with them. So, we should welcome foreign banks coming in.

What is your opinion on the future of Myanmar’s economy under the new government? As everyone knows, GDP is the indi- cator of a country’s economic prog- ress. According to the GDP growth rate, while US has seen a 2.6pc and Japan a 0.6pc increase, Myanmar has a growth rate between 7pc and 8pc a year. The reason this country’s growth rate is better than those of the US and Japan is due to the fac- tors of production – land, labour and capital – being fully employed in the US and Japan. Here, we still have abundant factors of production left to be used. Hence, the growth rate is higher in Myanmar. Under the new government, the growth rate would still be 7pc to 8pc. So, the economy won’t slow down, but rather become higher.

Why is it that most people live in poverty although our country’s economy has been steadily grow- ing at 7pc to 8pc annually? We need to find a solution, based on macroeconomic data, why most Myanmar people are in poor condi- tion while the country’s economy is improving. Figures released by the

World Bank show Myanmar’s GDP growth rate was 7pc in 2015, but the inflation rate was 10pc. It’s not go- ing to be easy to solve the inflation issue in our country. It will remain. But the government should try to set policies so that it would not rise too high. It is not easy to set infla- tion target policies. But if we ignore it, and the inflation rate becomes higher than the GDP growth rate, most people with low income would face economic hardship. I presume the new government will implement an inflation-targeting policy.

Why isn’t Myanmar, with a higher GDP growth rate, not as wealthy as the US or Japan? There are two ways of measuring

the GDP – the growth rate and the income level. The income level is

a measurement of GDP per capita

income. World Bank figures for 2015 show the income of a citizen

per year is $55,837 in the US and $37,322 in Japan, while Myanmar’s

is $1203. In other CMLV countries,

Vietnam’s income level is $2111, Laos’s $1812 and Cambodia’s $1158. In other ASEAN countries, Malay- sia’s per capita income is $9766, Thailand’s $5816 and Singapore’s $52,888. Therefore, according to the growth rate, Myanmar is higher, but according to the income level, US and Japan are higher. Only when the income level is high will the country be rich.

If GDP increases, won’t per capita income increase?

Yes, it would. If GDP increases, per capita income also increases. The income of a citizen here in 2011 was $824, but it increased to $1203 in


Looking at the figures, the income of a citizen has significantly increased. But, we do not see the economic situation of most people improved.

Yes, you are right. Per capita income

is calculated on an average for a

population of 53 million based on the country’s total economic output. Of the 53 million, 10pc could be filthy rich while 90pc might be living in absolute poverty. Most people’s income will increase if a policy balancing income distribution is

successfully implemented.

Translation by Thiri Min Htun

is successfully implemented. Translation by Thiri Min Htun Confusion still Htoo tHaNt A fter serving a

Confusion still

Htoo tHaNt

A fter serving a group of diners

at a trendy restaurant in Nay

Pyi Taw, the waiter whis-

pered to the customers, “Would you want the receipt with or without a tax stamp?” It’s not a question that should be asked, but frequently shoppers and diners are hit with this question when they take out their wallets to pay. Maybe the restaurant’s “Custom- ers First” motto reflects the owner’s wish not to trouble customers with services tax, but on the other hand, wouldn’t it be defying the govern- ment’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. The absence of a tax stamp means both customer and business owner have ignored the law. An interesting paradox to note:

Aside from local customers, this res- taurant in Nay Pyi Taw is regularly

patronised by local lawmakers too. Myo Zaw Aung, lower house NLD MP from Kawlin township, told The Myanmar Times this is not the only restaurant where such tax can go unpaid. “One big restaurant in Thapyay-

gone does the same. They asked us whether to charge us without the tax. There and then we had to give a short lecture to the waiter.” In general, 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), while no figures had been revealed in the annual budget since 1988. When Thein Sein’s government took over in 2012 the public was again informed about the coun- try’s income and expenditure, the amount of tax collected, and the tax revenue-to-GDP ratio. According to the Joint Public Ac- counts Committee, tax collections amounted to K1.693 trillion in the 2011-12 fiscal year and tripled to K3.372 trillion the following year. During 2014-15, tax revenue shot up to K6.515 trillion or 39.39 percent of the total state income. However, tax collections remained low in Myanmar compared to some neighbouring countries where it was as high as 80pc, and this prodded the government to improve its tax collection system. Win Shein, former minister of finance, told the parliament last December that although the previ- ous government had implemented policies to collect taxes efficiently,

some weaknesses still existed. “We are trying to prevent and investigate as much as we can those who are evading taxes, so that an appropriate amount could be realised, but there are still weaknesses in implementing it.” Poor tax collections added more pain to the exchequer. The lower tax revenue contributed to the huge budget deficit during the previous administration. In the 2015-16 fis- cal year, the government suffered a deficit of K3.614 trillion – almost five times more than K782 billion recorded in 2013-14. The government could be staring at a K3.922 trillion budget deficit or 4.66pc deficit-to-GDP ratio in the 2016-17 fiscal year. According to Swe Tint, director of the Ministry of Agriculture, Livestock and Irrigation, during an election year govern- ments everywhere tend to spend more money to create jobs, build infrastructure and improve health and education. However, whether this figure was achieved or not will only be known when the government reveals the figure, said two-term parliamen- tarian Ba Shein from the Arakan National Party. “Estimated [tax revenue] figures would be close to target. How much

B a n k i n g & F i n a n c e

Banking & Finance



reigns in taxation

SPECIAL SUPPLEMENT - OCTOBER 2016 7 reigns in taxation A receipt with a tax stamp _

A receipt with a tax stamp _ or many _ simply means customers have paid tax for what they have consumed. Photo: Thiri Lu

closer it is, we’ll get to know only when the government reveals it.” The amended 2016 National Budget Law has forecast the income tax revenue as K6.219 trillion, a neg- ligible increase from K6.218 trillion targetted in the original law. The present government’s tax policies are aimed at addressing some underlying weaknesses: to plug revenue leakages through tax evasion, upgrade the tax system to interna- tional standards, be more transparent, and balance economic stability and

domestic consumption. Money collected will be channelled for prudent usage, such as funding healthcare and protecting the envi- ronment and natural resources. “We would collect the tax that should be collected and then there would be transparency in reporting back to the public, so that they would want to pay their taxes. Look at, for instance, the telephone commercial tax. We already announced the K7 bil- lion tax revenue would be used for the education sector,” Myo Zaw Aung said.

The estimated revenue from the telephone commercial tax is about K80 billion, according to Win Shein. However, there are also criticisms about the current tax policies. Many say the taxes are a burden not to the wealthy class, like the entre- preneurs, but to those in the lower social strata. “Let’s say you buy a bottle of beer. It’s true the manufacturer paid the tax, but they give out that tax mon- ey only for a short period because

they will be getting it back from the customer. It means the consumer has to pay the liquor tax and for the liquor served. The manufacturer has added the tax to the beer price and people have to be paying it all back,” businessman Nay Soe from Pyinmana said. Civil sector employees feel the pinch too. Swe Tint said that even

a director who earns a little over

K300,000 monthly in salary is taxed. “We also pay tax. How much, I don’t know for sure. But they deduct taxes from our salary,” he said. He said the taxation system is still unclear. “We already paid our income tax. But when we buy a commodity they stick a stamp on the receipt, and so we have to pay tax again. The same

is also true in restaurants. So, we

don’t know for sure how many kinds of taxes we have to be paying in total,” he added. Deputy minister Maung Maung Win from the Ministry of Planning and Finance described in parlia- ment in September the tax-de- ducted salary as savings, and that a person is not required to pay tax again on it when buying real estate properties, building houses or purchasing cars. He explained, for example, for a director general who earns K500,000 per month, yearly in- come would be K6 million. When income tax is calculated, 20pc of the salary (K1.2 million), K1 million for a spouse, K1 million for two school-going children (K500,000 each) would be ex- empted. So, the taxable amount would

be only K2.8 million with tax amounting to K40,000. In other words, of the total salary, the tax is K40,000 and the remaining K50.6 million would be savings, he said. Although a person need not pay tax again when purchasing or building houses, or buying cars, government employees say they are still taxed for daily commodi-

ties purchased.

Myo Zaw Aung refuted criticisms that low-income earners have to shoulder extra taxes when buying goods and food. “It is not correct that low-income earners are burdened with tax. For example, daily wage earners can- not eat at trendy restaurants with their meager pay. People who go there are average income earners. Therefore, collecting tax in those places would not affect low-in- come earners,” he said. Ordinary food stalls, tea shops, small restaurants do not use tax stamps. “A cup of tea costs only K300. If 5pc tax is collected, it will cost K315. How are they going to collect K15? No one holds that kind of change anymore, and it would be hard for someone drinking a cup of tea to pay that amount of change,” Zaw, a tea shop owner from Pyinmana, said. “This government has already proclaimed that there would be no corruption and tax revenues would be used for public interest. I hope the public would also follow rules and regulations,” said Khin San Hlaing, chair of parliament’s Banks and Financial Development Committee.

Translation by Emoon and Khine Thazin Han

San Hlaing, chair of parliament’s Banks and Financial Development Committee. Translation by Emoon and Khine Thazin
San Hlaing, chair of parliament’s Banks and Financial Development Committee. Translation by Emoon and Khine Thazin


8 B a n k i n g & F i n a n c e

Banking & Finance


People-friendly services UAB’s priority

Bank CEO U Thein Lwin speaks candidly about modernising the banking sector, 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, including banking, is the back-

bone of the nation’s economy. Only if there were progress in this sector would there be national economic development. The three main factors for the financial sector’s progress, including banking operations, are the existence of stable financial institutions, the availability of innovative financial instruments and the emergence of deep financial markets. Through stable financial institutions, resulting in the correct and proportionate combination of financial instruments and financial markets, individuals, social organisations and the country as a whole would greatly benefit. For the development of the banking sector, it is necessary to improve the effectiveness of banking organisations to ensure their stability and that their services reach every citizen. For banking institutions to be efficient, banks need to adopt innovative information and communications technology [ICT]. Some examples are a centralised core banking system, internet banking, mobile banking, auto clearance system and auto payment system. Even though private banks in Myanmar have started using ICT, they are still not capable of providing comprehensive quality services due to lack of infrastructure. It is necessary to motivate private and state-owned banks to embrace ICT to develop their banking operations. Also, for a successful implementation, it is important to choose the right technologies on the advice of foreign profession- als. Otherwise, it could hamper operations despite the huge investments. Another problem we face is the scarcity of skilled human resources. It is impossible to permanently rely on foreign professionals. Instead, we have to be always on the lookout to produce local experts. At present, the cost of transactions is high because most banking services are just about with- drawals 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. Therefore, it is vital that a cheque clearing or an inter- bank electronic payment system be implemented instead. It’s also necessary to have a credit bureau or a credit infor- mation system. Although the present collateral-based loans produce good results, there is limitation for entrepreneurs to receive enough loans. Only with a credit information system

receive enough loans. Only with a credit information system Launching of a new UAB branch. Photo:

Launching of a new UAB branch. Photo: Staff

will it be easier for an unsecured lending service. 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. Though a credit bureau

has been formed, its main challenge is to receive exact cus- tomers’ data in real time from member banks using modern ICT. This could be achieved only if member banks, including state-owned, start using a centralised banking system.

I guess, by opening up branches, banks can serve every

citizen. According to available statistics, only 5 percent of

the adult population in Myanmar use banking services. To encourage more people to use banks, besides bank branches and automated teller machines [ATMs], internet banking and mobile banking should be introduced in areas where it is not feasible to open new branches.

Despite foreign banks making plans to open branches or already being present in Myanmar, so far they are not able to offer loans to local entrepreneurs. 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. According to some experts, the arrival of foreign banks in Myanmar with their low interest rate, new man- agement techniques, and innovative banking products and services could serve well for local banks. They also point out that there are some risks attached to these advantages. They advise that the international financing report standard (IFRS) be used when providing statistics to international monetary organisations and to the Central Bank. I also think state-run banks should be on a par with the private financial institu- tions and come under the Central Bank’s supervision, 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. In order to stabilise the banking sector and enhance the Central Bank’s supervisory and regulatory roles in time, a real-time electronic reporting system between banks and the Central Bank is needed. Banks also need to use a centralised banking system to transmit data that the Central Bank needs in time. Besides, it would be necessary to develop the capital market as the country progresses. An important factor for a stable banking sector is to curb rumours. As the number of social media users are increas- ing in Myanmar, rumours that have an impact on political, economic and religious sectors spread like wildfire via these media, adversely affecting the interests of the country, in- cluding banking and other businesses. Legal action should be taken against those who intentionally disseminate rumours through social media. There are still weaknesses in the cur- rent Electronic Telecommunications Law. To gain the public’s trust, the banking businesses should cooperate among them- selves and adopt good corporate governance. It has been suggested that foreign banks should be gradu- ally allowed to expand their operations in the country only when it’s certain that the local banking sector is stable and strong. If they are allowed to provide the same services, before an appropriate time, then people would start mov- ing their money saved in local banks to foreign banks, thus

creating a monetary crisis leading to the collapse of the local financial sector. Currently, licensed foreign banks are not permitted to offer direct loans to local business people. Only foreign entrepreneurs can borrow from them. Also, foreign banks are not permitted to accept deposits from Myanmar citizens. Loans to local entrepreneurs can be granted only through local banks. Interbank lending is still not widely used. At present, for trade facilities, although the lending interest rate of foreign banks to local banks is cheaper than the rates of local banks, it’s still high compared to international interest rates. This is because of the designated rate for “country risk”. With political stability and withdrawal of the US sanctions, the rate could be in line with international countries.

I think most local banks would welcome the arrival of foreign

banks here. Local banks can expand interbank lending with for- eign banks and in turn lend money to local businesspeople at a lower interest rate, negotiate for cheaper interest rates for trade facilities and help local entrepreneurs in international trading. I think the entire banking sector will benefit if the foreign banks’ current status is maintained and gradually allowed to expand, once the regulatory and management roles of the Central Bank becomes stronger and local banks are stable and robust.

Bank becomes stronger and local banks are stable and robust. U Thein Lwin, CEO of United

U Thein Lwin, CEO of United Amara Bank. 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. It is providing innovative deposit products for customers of different age groups, disbursing various kinds of business loans and carrying out interna- tional banking services. Besides, for stable and systematic expansion of banking activities, we are adopting ICT at every stage of our processes. 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. Moreover, we are providing an SMS alert service on their mobile phones for withdrawals, transfers and deposits. These services strengthen their bank account security. For more effective customer banking services in 2016- 17, we are expanding our services by installing more ATMs, launching more bank outlets, introducing mobile banking, issuing local and international credit cards, and international prepaid cards. We also provide point-of-sale services that would accept international credit cards and Myanmar Pay- ment Union cards. We conduct customer service trainings to our staff to ensure our customers are satisfied with our services. To build trust, we have introduced good corporate governance and implemented the IFRS.

Your comments on Myanmar’s economic prospects for 2017? Along with democratic reforms, Myanmar’s new govern- ment has already set its 12-point economic policy. Our neighbours have big consumer markets, we are located in a strategic location in the region, and these factors are good economic opportunities for us. Moreover, due to the lifting of the US sanctions, there is a heightened interest from the business community in the US and other countries to invest in Myanmar. That’s why you can be very optimistic about Myanmar’s economic prospects in 2017. To be able to fully grasp these opportunities and prospects, we need to bridge the gap in infrastructure, set perfect laws and regulations, and establish efficient institutions. Particularly, we need to improve electric- ity supply, transportation, have absolute efficiency in financial institutions and have skilled human resources. These need to be done within six months or a year. Although Myanmar had had good policies under succes- sive governments, some sectors, including private, did not gain success because of the weaknesses in carrying out the policies. These flaws should be tackled with the assistance of international or local experts. Matters im- portant to the country’s economy and the people should be given priority when implementing projects. Relevant businesspeople need to make changes in advance regard- ing their business management so that the private sector can develop and compete with foreign enterprises. 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, along with Myanmar citizens’ stron- ger desire to cooperate with the elected democratic


Translation by San Layy, Win Thaw Tar and Thiri Min Htun

ger desire to cooperate with the elected democratic government. Translation by San Layy, Win Thaw Tar
B a n k i n g & F i n a n c e

Banking & Finance



Pay a little, manage your risks

Insurance is seen as a sunrise industry, but there are hurdles to overcome – and public awareness is just one of them

tiN yadaNar tuN

M yanmar’s insurance indus-

try, still at an infancy stage,

is beginning to see some

increase in consumers’ appetite for financial security. The change in demography and rising per capita income is expected to further stimulate the under- penetrated sector. Myanmar’s popu- lation is already hitting 53 million and young people account for about 28 percent of that figure, which is another factor. While insurance coverage figures are still dismal, there has been an uptick in the industry as the domes- tic economy matures and industry policies are relaxed. Since 2012, about 12 private insur- ance companies have begun opera- tions, according to industry observers. “Myanmar people don’t exactly know the advantages of insurance coverage. Insurance services entered this country later compared to other countries, so facts and knowledge

about insurance should be widely dis- seminated. There has been a gradual increase in customers over the three years since private insurance companies started operations here,” said Than Zaw, general manager of International Kanbawza Insurance Co Ltd’s claims department. He said insurance means providing financial compensation for a specified loss and the insurance business is a risk transfer mechanism, where a person’s risk is transferred to an in- surance company by paying a certain amount of premium. “When lives, businesses or proper- ties are damaged or lost due to vari- ous reasons, money is compensated to replace these losses,” he added. When compared to Western coun- tries, the culture of buying insurance policies has not really caught up in Myanmar, said Than Zaw. Lack of awareness about insurance coverage and social taboos continue to hinder the industry’s growth. According to state-owned Myanma Insurance, the number of cars insured with the company and other private firms have not even reached 10 per- cent of the total number of automo- biles in Myanmar. “There are over 6000 cars insured with Myanma Insurance and over 60,000 with six other private insur- ance companies. There are about 800,000 automobiles registered with the Road Transport Administration Department [RTAD], meaning over 700,000 uninsured cars ply the roads compared to less than 10pc insured,” said Aye Min Thein, Myanma Insur- ance’s administrative director. In some countries, there is a man- datory requirement for car insurance, but in Myanmar no such law exists yet. However, according to RTAD regulations, if a driver knocks down a person, compensation has to be paid to the victim, he said. Experts say there should be a wider use of insurance services and some of it should be made mandatory, as in developed countries. University lecturer Thidar Aye, who has health insurance, said, “Right now,

I only have my health insurance that covers specific medical costs and not all of them. In other countries, all types of treatment can be covered by an insurance company and we do not need to worry about medical expenses. We need to expand [to include] these kinds of insurance and service in this country.” But existing guidelines do not fa- vour industry players as well. There are over 40 different insurance policies at Myanma Insurance, but private companies can only promote 12 types to the public, including insurance for fire, life, health, car and snakebites. As for company coverage, staff should have life insurance but only a few are insured, according to insurance experts. “You can have insurance for all kinds of employees. It would be practical for blue-collar workers, such as those in the construction sector, to be insured. The fee is not much. By paying a premium from

K1000 to K50,000, a worker injured in an accident can receive compen- sation of K100,000 to K5 million,” CB Insurance’s administrative director Thaung Han said. Not many small businesses have insurance and those who do have a policy, like fire insurance, only get it to qualify for bank loans. “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,” Aung Thein, a small business entrepre- neur, said. “Our family has automobile and health insurance. We would also want to have other insurance if they are suitable for us. Once we have them, we don’t need to worry as much if any accident happens.” First National Insurance (FNI) deputy managing director Aung Ko Ko Tin Win said insurance is a

necessity. “In Myanmar’s developing economy, together with the progress of the banking sector, it is very impor- tant to protect public businesses and properties.” He said by buying insurance poli- cies, owners are buying protection against damages and losses that could occur. Than Zaw concurs. “When foreign investors come here, they insure all their businesses. The premium fee is very small. If something of a large value is lost, the compensation would be huge, and so it’s indeed beneficial to the insurer. The premium fee would be only 1pc of the real value and it would not be a burden to customers.” The FNI, under the Ministry of Planning and Finance’s Insurance Business Supervisory Board, is providing insurance services for risk management. It is also trying to create greater public awareness on the need for insurance. FNI’s

head office is in Yangon and it has branches in Mandalay, Mawlamyine, Monywa and Pyay. 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. AMI is planning to link up with a Sri Lankan company in the coming fiscal year to initiate an IT-based system. To position itself more strongly in the market, the company is hir- ing experienced staff and younger employees, who are then given local and international trainings to enhance their talents. Besides promoting public awareness on the importance of insurance, in major cities nation- wide AMI actively participates in natural disaster relief and rehabili- tation works, said Myo Min Thu.

Translation by Khine Thazin Han

participates in natural disaster relief and rehabili- tation works, said Myo Min Thu. Translation by Khine
participates in natural disaster relief and rehabili- tation works, said Myo Min Thu. Translation by Khine


10 B a n k i n g & F i n a n c e

Banking & Finance


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, even renting one can be

troublesome to most families, no thanks to rising demand, limited land space, the lack of infrastructure and, most of all, insufficient financial resources. Even affordable schemes, first introduced by the previous government and quite popular with many wishing to own apartments, can be out of reach. Most families lucky enough to win a chance to buy a home, after the drawing of lots, cannot afford to pay the sizeable initial payment. Enter Construction and Housing Development Bank Ltd (CHDB), the only bank that has the Ministry of Construction’s backing. The bank supports the development of housing, working to build trust and confidence with the public and ensure low- cost housing goes to families who deserve it. To those ends, people can now open CHDB housing savings accounts that would give them a long-term guarantee of house ownership.

CHDB managing director Win Zaw told The Myanmar Times, “People should open a housing savings account at our bank. If a person wants to buy an apartment costing, let’s say, K10 million, that person will have to pay around K3.5 million to K4 million as a down payment. We want them to pay it through their bank savings here. This bank would not have any reason to double-check if buyers’ savings cover the amount of the first instalment, and whether they can repay the bank every month for eight more years. “This is a way of building confidence between the bank and the apartment buyer. 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

Urban and Housing Development [DUHD] which would in turn be CHD Bank supports the development of

CHD Bank supports the development of housing. Photo: Zarni Phyo

monitoring their accounts to call in those who have enough down payments to participate in the lot drawing for an apartment. If there are 10 persons on the list qualified to participate, and if there are only five apartments, those who are left out this time will always get a chance again whenever there are more apartments available. That means everyone can definitely own an apartment some day.” CHDB, managed by the Ministry of Construction, received its official licence from the Central Bank to carry out its banking business in 2013, in accordance with the Myanmar Companies and Myanmar Currency Acts. One advantage CHDB has over other banks is that, as a development bank rather than a commercial institution set up to finance housing development, it is able to deal in long-term loans. Customers who have a housing savings account with CHDB would pay the usual bank interest rates, Win Zaw said. It’s one thing to say low-cost apartments

built by the government should be in the hands of those who really need them, but in reality there are complications in the step-by- step documentation and bank scrutinisation processes regarding mortgage and payment. Affordable apartments currently cost at least K10 million. With a CHDB housing account, the initial down payment is more than K3.5 million or 30 percent of the total price and the rest is paid in monthly instalments over eight years. It means banks have to make sure that buyers can regularly repay their monthly instalments until the loans are paid in full. Banks, naturally, will only offer loans to people who can definitely repay them. “I do not want buyers who can afford the down payment and yet do not win the lucky draw to be discouraged,” Win Zaw said, adding that eventually they would be in an even better position to buy a home once they win a draw “if they keep saving, and if their account reaches, for example, K5 million”. That would

mean they wouldn’t need such a big loan. “If the loan is smaller, the monthly amount to be paid back would be smaller. There is no regulation on how much can be saved or when to stop saving. I want people to save as much money as they can.” Those who can afford it can also upgrade to more pricey homes through a CHDB housing savings account. “Someone might be currently living in a K10 million apartment, but then their income grows and they want to move into a K20 million unit. The present apartment could be handed back to the DUHD and our bank would be ready to lend extra money for the other apartment,” Win Zaw said. Over 4000 people had CHDB housing savings accounts as of early September, and about 10 new customers walk in every day. If anything, the demand for low-cost apartments will only increase, especially in Yangon. Every year about 300,000 people migrate to Yangon seeking work, a better life and shelter. The National League for Democracy government, which came to power in April, has announced plans to build 200,000 low- cost apartments to try to meet demand. At present, tenders are open to build 8000 apartments, each costing under K10 million, in Dagon Seikkan, Hlaing Tharyar and Thanlyin townships. DUHD director general Min Htein said, “We have made an announcement regarding the opening of housing savings accounts. Once the necessary initial instalment is deposited, they would be placed in housing which has already been built. Priority will be given to those who have the first instalment of 30pc in savings.” More than 2000 apartments in three low- priced Shwe Lin Ban housing projects in Yuzana and Kanaung and Hlaing Tharyar township will be on for sale soon.

Translation by Win Thaw Tar and San Layy

on for sale soon. Translation by Win Thaw Tar and San Layy Still the people’s bankers

Still the people’s bankers

Zaw Zaw Htwe

T he pawnshop, a traditional

micro-financing model,

continues to thrive as

Myanmar strives to modernise itself. In a country where mobile banking and other banking instruments are making an appearance, the low- profile neighbourhood pawnbroker remains a valuable financer, especially to low-income earners. Every morning in Yangon suburbs like Hlaing Tharyar, not only stores and markets are crowded with people but even pawnshops draw customers who queue to obtain small loans. People hock their valuables, from precious jewellery to watches to expensive clothing, for a short span of time in exchange for fast cash to bridge financial shortfalls. State-owned pawnshops were first introduced in 1952 in Myanmar and later licensed private pawnbrokers continued to provide express loans, with little paperwork and low interest rates, filling the needs of families desperate for cash. To Hla Htay, a Hlaing Tharyar- based welding workshop owner, the pawnshop is his financial lifeline, as the informal banking system

provides easy access to credit, which helps him to operate his business. He said, “We have to pay at least 10 percent interest to informal moneylenders. But at pawnshops, the interest is just 3pc if we leave some kind of jewellery. We can pay interest once in three months until we save enough money to redeem our things. Pawnshops are very useful to us.” If borrowers have difficulty redeeming their collateral on the due date, pawnshops give a grace period of 10 days, so there’s no need to worry about losing your valuables, he said. “I prefer pawnshops and wish there would be more of them,” added the welder. However, people who don’t own any valuables or jewellery tend to rely on informal moneylenders, who charge hefty interest rates calculated on a daily basis – at least 10pc to 20pc for every K100. Since this money lending business is not authorised, there is no guarantee for both lender and borrower. Though lenders make huge profits, they could also face a big loss if a borrower disappears without repaying the debt. Similarly, 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. There is some guarantee in borrowing from pawnshops and interest is also low. But pawnbrokers said they too are vulnerable to risk, for instance, when the collateral happens to be stolen goods or fake materials deposited by unscrupulous customers. A staff at a licensed pawnshop in Hlaing Tharyar township, who did not want to be named, said they charge 3pc interest if lenders pawn gold, and between 5pc and 10pc if it’s clothing or other items. “If the collateral is gold, we lend money by calculating based on the prevailing gold price. For example, if the market price is K600,000 per tical [16.4 grams], we give out a loan of about K550,000,” he said. One authorised pawnshop that has been operating for the past six years lends, on average, between K7 million and K9 million a day to customers. An initial capital of K100 million is needed to set up a licensed pawnshop and these businesses pay tax, so both the government and lenders benefit from their services. Currently, 22 authorised

benefit from their services. Currently, 22 authorised An authorised pawnshop at a suburb in Yangon. Photo:

An authorised pawnshop at a suburb in Yangon. Photo: Zaw Zaw Htwe

pawnshops are operating across Hlaing Tharyar township. Even then, people still frequent informal moneylenders daily, which indicate there is pressing need for a formal microfinancing system to relieve people of their financial anxieties. “If you borrow from informal moneylenders, you have to pay high interest rates, so many prefer pawnshops which charge K3 interest if gold is pawned. Yet, there are a lot of people struggling with higher living costs and borrow from both pawnshops and informal lenders,” said Myint Thein, chair of Hlaing Tharyar’s National Democratic Force. He said there should be more authorised pawnshops that charge moderate interest rates to meet the demands of people in dire need of cash.

At the opening ceremony of the national-level workshop on rural development and poverty reduction held in 2011, then president Thein Sein said, “Financial investment that the rural population needs must be provided through microfinance in order to reach the rural areas. Microfinance institutions must be made legal.” Financial experts continue to debate the pros and cons of pawnbrokers. Some argue they fleece poor customers by charging high rates and valuables will be lost if a person fails to repay loans, while others say these lenders are part of the informal banking system who are ready to provide instant cash to the needy, minus

the bureaucracy.

Translation by Zar Zar Soe

banking system who are ready to provide instant cash to the needy, minus the bureaucracy. Translation
B a n k i n g & F i n a n c e

Banking & Finance



The ups and downs of stock market trading

With many new to the game, 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. It is a tricky business and only those with

knowledge should dare trade in stocks. In fact, the poor performance of the Yangon Stock Exchange (YSX), which officially opened for trading in March some two decades after it was first conceived, revealed that local investors still lack acumen in stock trading, say experts. So far, three companies have listed on the YSX, namely First Myanmar Investments (FMI), Myanmar Thilawa SEZ Holdings (MTSH) and Myanmar Citizens Bank (MCB). There was shortlived euphoria in the bourse when the listings took place. Stock prices rose due to the buying sprees in the early weeks as bullish investors entered the market, many shifting away from the traditional over-the-counter trading. But the tide turned in late June when there was sharp decline in stock prices after nervy investors started to pull out their funds, many staying only for short-term gains. 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. They said those who wished to invest in shares should have a clear understanding of how the market works before putting in their money. Aung Tun Thet, an economist and former economic adviser to the president, 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. “When you buy a share, you give your money to the company to invest in their business. If their business makes profits, you get profits. If their business fails, you lose your money. You can’t say for sure if you would make a profit just by buying a share. You need to be aware of that,” 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. Certainly, stock market trading is not for the faint-hearted. It can be a volatile business, as investors could lose money in a short span of time while smart investors earn millions

in hours or days. At the moment, share prices of two companies listed on the YSX are in the red. For instance, FMI’s share price was K36,000 when first listed and rose to about K50,000 in May. But in September its price slumped to K17,000. Similarly, MTSH’s shares traded at K55,000 when listed, subsequently touching nearly K70,000 in May. Last month its share price dived to K41,000. However, MCB shares prices have risen from the initial K6800 per share to K8200. There have been glitches on the way too. For instance, YSX manager Thet Tun Oo said that immediately after the establishment of the stock market, stock traders were badly hit due to the incorrect input of the shares list. A stock exchange has a market price and a limit price. Investors can place their shares in either way. Depending on demand and supply, the trading could stall resulting in plummeting share prices. Therefore, investors need to make the right decision when placing their shares, he said. “Placing shares on market price means trading at whatever price comes on the market. If you place shares on limit price, it means a transaction would be made only when the price matches your expectation. The stock market price depends on demand and supply, the kind of order and the number of shares placed. So, it is important to decide what order and what price to place,” he told The Myanmar Times. 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, spending and expenditure. These facts are published on the YSX and the respective company’s website. The document also outlines the company’s management board, capital assets, capital investments, and current and future projects. MCB chair U Toe Aung Myint previously said, “Share buyers can learn details about our company in the disclosure document. In this way, they can decide about their own investments.” Maung Maung Thein, who was involved in the setting up of YSX, advised the public to clearly understand the background of the company, especially their financial

the background of the company, especially their financial Three companies have listed so far on the

Three companies have listed so far on the Yangon Stock Exchange since it officially opened in March. Photo: AFP

status such as profit and loss, and the nature of their business, before deciding to invest. He also advised investors to choose the right securities company with which to do their trading. At present, the Security Exchange Supervisory Commission (SECM) has granted permission to the following companies to engage in securities trading: AYA Trust Securities Company, CB Bank Securities, Myanmar Securities Exchange Center, Global World Securities, Expert Investment Securities, Aung Myint Mo Min Securities, KBZ Stirling Coleman Securities, KTZ Ruby Hill Securities, Amara Securities and Union Trust Securities Company. Long-term traders are in a better position, say experts, compared to those who trade shares for short-

term gains. The latter is easily exposed to losses when there is a sudden fluctuation in the market. “Long-term investment would be the best for share traders. If they are investing for the short term, it would be like gambling and there would be higher risks. If shares are bought when prices are rising, [the investor]

thinking that prices will rise and expecting high profits later, you could

face losses

should be a long-term investment,” U Thein Wai, chair of First Myanmar Investment Ltd, said at the company’s 24 th anniversary celebration. Authorities are taking precautions to prevent ill-informed investors from losing their savings in the stock market. In that regard, the SECM has granted permission to eight training schools to conduct stock

That’s why share trading

market trading courses and is in the process of granting the ninth licence. It is also planning to open its own training school for the public. The licensed training centres are MIND Investment Institute, Shenton Institute of Applied Finance, Myanmar Institute of Finance, MyAsia Consulting Co Ltd & Infra Partner IMCM, Myanmar Certified Training Centers Co Ltd, IMA Institute of Accounting & Finance, Global Institute of Finance and Myanmar Institute of Business. They offer a wide range of programs in share trading, sharpening investment skills, understanding financial management and the international

monetary market. Translation by Kyawt Darly Linn and Thiri Min Htun

financial management and the international monetary market. Translation by Kyawt Darly Linn and Thiri Min Htun
financial management and the international monetary market. Translation by Kyawt Darly Linn and Thiri Min Htun