Jun 8, 2013

Moving Myanmar to a banking economy

Myanmar will need to get the basics right for its banking system in order to propel the private sector to progress, a top executive of a leading Thai bank told global business leaders on Friday at the World Economic Forum on East Asia.

Teeranun Srihong, co-president of Kasikornbank Bank, highlighted the need for Myanmar's banking system to work on the efficiency of the payment system. Only then can it take steps to create confidence among the public so as to develop the deposit side of banking.

Srihong was speaking on a panel titled “Moving from a Cash to a Banked Economy” at the Myanmar International Convention Center, in the capital Nay Pyi Taw. Myanmar is currently hosting the 22nd World Economic Forum on East Asia for the first time, a historic event that has attracted over a thousand participants.

A robust banking sector is seen as critical to Myanmar's economic development. But the country retains a cash culture despite ongoing liberalisation of the economy, said Than Lwin, deputy chairman of Kanbawza (KBZ) Bank.

The panel highlighted an unofficial survey among 500 vendors in main cities in Myanmar which found that few people are using basic banking services except for sending remittances back to relatives in other locations. This is a result of a lack of bank branches, a lack of time, as well as the feeling among customers that filling out forms and giving data and information are a “far too cumbersome” process.

Furthermore, and an aspect unique to Myanmar, is the lack of confidence among the people in using banking services. This is due to a host of historical reasons including the abrupt money cancellation promulgated by a previous government.

U Win Shein, Union Minister of Finance and Revenue, added that his assessment of the root cause is people's low level income, as well as general lack of knowledge about banking services.

“People will want to keep money in safes rather than in banks," said the Minister.
“Overall, we need to reduce poverty,” he added.

Despite an opportunity to develop mobile and digital banking technology as a late economic development starter, Srihong stressed that this remains a pipeline dream.

“Money in general doesn't exist in the banking system, nor will microcredit be much help as the system would require sophisticated risk management which does not currently exist," said the Kasikornbank Bank chief

To him, Myanmar would do best to develop basic banking infrastructure to enhance payment efficiency and attract deposits. Insurance is another product which could be deployed to boost confidence in the financial system as it would help protect depositors and give them financial safety.

“We've got to get more people to use the banking system first,” he stressed.

Source: Eleven Weekly Media