You are on page 1of 12



Modern banking and the big leap

Myanmar must make
Business and the money trap
Pay a little, manage your risks

Banking & Finance


Business and the money trap

SMEs need money to expand, but so many
dont qualify for loans simply because they are
not registered as businesses
Myat Noe Oo

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

perators of small and medium enterprises (SMEs),

the pillar of Myanmars 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.
Its 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 cant 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
departments 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
According to Aye Aye Win, director general of the
CDSMED, There are only over 50,000 small and mediumsized 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.
Translation by San Layy

Banking & Finance


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. 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.

hat kind of policy

changes need to be
made for the entire
banking sector to move forward?
The banking sectors main service
is accepting deposits and disbursing business loans to the corporate
sector and its other clients, when
needed. It also provides other services 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 payment, 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. Realtime 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 clearing house to be processed. In short,
banking should be transformed
from conventional to one using ICT
[information and communications
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
This is different. Loans paid out by a
bank are money deposited by bank
customers. So, bankers have to verify 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 already pooled in their shares. At present, 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 business. 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 collateral would have been purchased
with informal contracts and not
officially registered. If a companys
cash flow or balance sheet is not
standardised or audited, it would

take a banker several more days to

do the additional checks. Im not
saying all borrowers are like this.
Some borrowers are so organised
that they have their business figures 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 foreign banks is good and prudent. No
countrys central bank would grant
a full-fledged licence to foreign
banks immediately after their entry. 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 compliant and how much it supports
Myanmars economy before giving
it more authority.
Currently, foreign banks are not
allowed to accept deposits but permitted to offer loans. The central
Continued on page 6

Banking & Finance


Advantages of modern
mobile banking

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

Htoo Htet Tayza

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-fastestgrowing mobile market in the world, after India and
China, and has an impressive 80 percent smartphone
usage rate. Therefore, Myanmar isnt simply mobile
ready _ its 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
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 timeconsuming.
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.
(Htoo Htet Tayza is managing director at
Asia Green Development Bank.)

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

Banking & Finance


Confusion still
Htoo Thant

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 countrys economy is assessed
by the bank loans to GDP (gross
domestic product) ratio.
In Myanmar, that ratio is only
about 15 percent, against Vietnam (90pc), Thailand (80pc) and
Malaysia (70pc). For Myanmars
economy to develop, banks need
to disburse more loans. A foreign
bank is allowed to open only one
branch and must bring in a minimum investment of US$75 million.
The 13 foreign banks allowed to
operate would bring in together
about US$1 billion dollars as loanable funds in Myanmar. Myanmars
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 compete with those who are inferior
to us, we wont progress. Foreign
banks are superior to us in every
way, in technology and experience. Local banks will improve by
competing with them. So, we should
welcome foreign banks coming in.
What is your opinion on the future
of Myanmars economy under the
new government?
As everyone knows, GDP is the indicator of a countrys economic progress. 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 countrys
growth rate is better than those of
the US and Japan is due to the factors 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
wont slow down, but rather become
Why is it that most people live in
poverty although our countrys
economy has been steadily growing at 7pc to 8pc annually?
We need to find a solution, based
on macroeconomic data, why most
Myanmar people are in poor condition while the countrys economy is
improving. Figures released by the

World Bank show Myanmars GDP

growth rate was 7pc in 2015, but the
inflation rate was 10pc. Its not going 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 inflation 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 isnt 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 Myanmars
is $1203. In other CMLV countries,
Vietnams income level is $2111,
Laoss $1812 and Cambodias $1158.
In other ASEAN countries, Malaysias per capita income is $9766,
Thailands $5816 and Singapores
$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, wont 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
Yes, you are right. Per capita income
is calculated on an average for a
population of 53 million based on
the countrys total economic output.
Of the 53 million, 10pc could be
filthy rich while 90pc might be living
in absolute poverty. Most peoples
income will increase if a policy
balancing income distribution is
successfully implemented.
Translation by Thiri Min Htun

fter serving a group of diners

at a trendy restaurant in Nay
Pyi Taw, the waiter whispered to the customers, Would you
want the receipt with or without a
tax stamp? Its 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 restaurants Customers First motto reflects the owners
wish not to trouble customers with
services tax, but on the other hand,
wouldnt it be defying the governments 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 restaurant 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
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 Seins government
took over in 2012 the public was
again informed about the countrys income and expenditure, the
amount of tax collected, and the tax
revenue-to-GDP ratio.
According to the Joint Public Accounts 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 previous 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 fiscal 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 governments 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 parliamentarian Ba Shein from the Arakan
National Party.
Estimated [tax revenue] figures
would be close to target. How much

myanmar banking at a glance

Banking & Finance


reigns in taxation

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, well 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 negligible increase from K6.218 trillion
targetted in the original law.
The present governments tax
policies are aimed at addressing
some underlying weaknesses: to plug
revenue leakages through tax evasion,
upgrade the tax system to international 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 environment 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 billion 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 entrepreneurs, but to those in the lower
social strata.
Lets say you buy a bottle of beer.
Its true the manufacturer paid the
tax, but they give out that tax money 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 dont
know for sure. But they deduct taxes
from our salary, he said.
He said the taxation system is still
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

dont 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 parliament in September the tax-deducted 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 income 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 exempted.
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 commodities 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 cannot 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-income 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 parliaments
Banks and Financial Development
Translation by Emoon
and Khine Thazin Han

Banking & Finance


People-friendly services UABs priority

Bank CEO U Thein Lwin speaks candidly about modernising the banking sector,
rising foreign competition and the countrys economic potential
Zay Yar Linn

hat kind of policy changes need to be made for

the entire banking sector to move forward?
The financial sector, including banking, is the backbone of the nations economy. Only if there were progress in
this sector would there be national economic development.
The three main factors for the financial sectors 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 professionals. Otherwise, it could hamper operations despite the huge
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 withdrawals 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 interbank electronic payment system be implemented instead.
Its also necessary to have a credit bureau or a credit information 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

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 customers 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 management 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 institutions and come under the Central Banks 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 Banks 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 increasing 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, including banking and other businesses. Legal action should be
taken against those who intentionally disseminate rumours
through social media. There are still weaknesses in the current Electronic Telecommunications Law. To gain the publics
trust, the banking businesses should cooperate among themselves and adopt good corporate governance.
It has been suggested that foreign banks should be gradually allowed to expand their operations in the country only
when its 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 moving 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, its 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 foreign 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.

U Thein Lwin, CEO of United Amara Bank. Photo: Supplied

Any additional service in the pipeline for your banking

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 international 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 201617, 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 Payment 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 Myanmars economic prospects
for 2017?
Along with democratic reforms, Myanmars new government 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. Thats why you can be very optimistic
about Myanmars 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 electricity 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 successive 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 important to the countrys economy and the people should
be given priority when implementing projects. Relevant
businesspeople need to make changes in advance regarding their business management so that the private sector
can develop and compete with foreign enterprises.
I think Myanmars 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 stronger desire to cooperate with the elected democratic
Translation by San Layy, Win Thaw Tar and Thiri Min Htun

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

yanmars insurance industry, 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 underpenetrated sector. Myanmars population 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 domestic economy matures and industry
policies are relaxed.
Since 2012, about 12 private insurance companies have begun operations, according to industry observers.
Myanmar people dont 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 disseminated. 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
Ltds claims department.
He said insurance means providing
financial compensation for a specified
loss and the insurance business is
a risk transfer mechanism, where a
persons risk is transferred to an insurance company by paying a certain
amount of premium.
When lives, businesses or properties are damaged or lost due to various reasons, money is compensated
to replace these losses, he added.
When compared to Western countries, 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 industrys growth.
According to state-owned Myanma
Insurance, 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.
There are over 6000 cars insured
with Myanma Insurance and over
60,000 with six other private insurance 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 Insurances administrative director.
In some countries, there is a mandatory 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 favour 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 compensation of K100,000 to K5 million, CB
Insurances 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 its not a
good omen to be thinking about
occupational hazards even before a
business has started and they also
dont trust in insurance companies
to pay them compensation, Aung
Thein, a small business entrepreneur, 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 dont 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 Myanmars developing

economy, together with the progress
of the banking sector, it is very important to protect public businesses and
He said by buying insurance policies, 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 its indeed beneficial to the
insurer. The premium fee would
be only 1pc of the real value and it
would not be a burden to
The FNI, under the Ministry of
Planning and Finances 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. FNIs

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
AMI is planning to link up with a
Sri Lankan company in the coming
fiscal year to initiate an IT-based
To position itself more strongly
in the market, the company is hiring 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 nationwide AMI actively participates in
natural disaster relief and rehabilitation works, said Myo Min Thu.
Translation by Khine Thazin Han

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

et alone pursuing ones 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
Enter Construction and Housing
Development Bank Ltd (CHDB), the only
bank that has the Ministry of Constructions
backing. The bank supports the development
of housing, working to build trust and
confidence with the public and ensure lowcost 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
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, lets 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

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.
Its 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-bystep 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 wouldnt 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 lowcost 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 lowpriced 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

Still the peoples bankers

Zaw Zaw Htwe

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 lowprofile 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
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 Tharyarbased 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 theres
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 dont 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 arent 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
its 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
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

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
Tharyars 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

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 & Finance



The ups and

downs of
stock market
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

nvesting in the stock market

is not childs 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
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 cant 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, FMIs 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, MTSHs 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 companys website.
The document also outlines the
companys 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
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

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 ... Thats why share trading
should be a long-term investment,
U Thein Wai, chair of First Myanmar
Investment Ltd, said at the companys
24th 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

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