AUGUS T 2 0 1 7The Banking Sector inMyanmar: An Assessment ofRecent ProgressJohn Schellhase and Lena Sun

INTRODUCTIONContrary to some international expectations, the government thatcame to power in Myanmar after the 2010 elections began anaggressive reform agenda aimed at making the political processmore democratic and the economy more open and market oriented.On the political front, the previously barred National League forDemocracy (NLD), led by Nobel Peace Prize laureate Aung San SuuKyi, was allowed to participate in the 2012 by-elections, and in 2015,the NLD won majorities in both houses of the Myanmar parliament.1In parallel with opening up the political process, policymakersin Myanmar initiated a number of market-oriented reforms. Thegovernment reduced restrictions on imports, cut export taxes, andopened the country to foreign investment. The effects of theseefforts have been promising, as Myanmar has sustained an averageGDP growth of over 7 percent annually since 2011, with GDP percapita almost doubling over that period to about US 1,100.2Despite recent progress, a number of challenges remain. The currentgovernment is balancing a range of priorities, from ambitiouspeace negotiations with multiple armed groups, to developingthe public health infrastructure, to responding to the physical andeconomic destruction from Cyclones Komen and Mora (2015, 2017),to reorienting the economy to one of private-sector-led growth. Inthis last regard, however, Myanmar remains a difficult place to runa business, ranking 170th out of 190 countries in the World Bank’sDoing Business Index and 131st out of 140 economies in the WorldEconomic Forum’s Competitiveness Index.Among these initiatives, banking-sector development in particularhas become a major focus of recent reforms, given the role that awell-functioning financial sector plays in enabling the growth of theprivate sector. Recent efforts to develop the banking sector have2  MILKEN INSTITUTETHE BANKING SECTOR IN MYANMAR1The NLD’s Htin Kyaw becamepresident and appointed AungSan Suu Kyi as the head of thegovernment in the new MyanmarState Counsellor Office. Themilitary, though, continuesto indirectly and directly holdsignificant political influence.2In local currency terms, GDP percapita has grown from 793,000kyat in 2010 to 1.4 million kyat in2016, a 44 percent increase.

EXECUTIVE SUMMARYTITLEINTRODUCTIONincluded both policy reforms and investments in the paymentinfrastructure. On the legislative and regulatory front, thegovernment has enacted several new laws, including the ForeignExchange Management Law in 2012, the Central Bank of MyanmarLaw in 2013, and the Financial Institutions Law in 2016. These lawsended Myanmar’s system of dual exchange rates, established centralbank independence, and set strong prudential standards for thebanking sector. At the same time, the government has also takententative measures to enable foreign participation in the bankingsector.While these achievements lay the groundwork for further progress,policymakers remain concerned about financial fragility and thepotential for crises. The memory of the 2003 banking crisis is stillstrong, and there is a lack of public trust in the banking systemas a whole. For these reasons, banking regulation has remainedsomewhat heavy handed. However, rather than limiting systemicrisk, some current regulations may in fact inhibit the deepening andstrengthening of the banking sector.This paper takes stock of the state of Myanmar’sbanking sector at its current stage of development.The document begins with an overview of the banking sector,including its major institutions and the supervisory framework. Thesecond section examines the core challenges for banking-sectordevelopment. Then, the document turns to the state of financialinclusion for businesses, households, and farms. The paperconcludes with a discussion of the government bond market inMyanmar.3  MILKEN INSTITUTETHE BANKING SECTOR IN MYANMAR

OVERVIEW OF THEBANKING SECTORThere is a lack of public trust in the banking sector, and this isnot surprising given Myanmar’s financial history. In 1962, theRevolutionary Council government nationalized all privately ownedbanks in the country. Later, the military government merged allbanking into a single entity that would later be dismantled into fourseparate state-owned banks. In the early 1990s, the market wasopened again to privately owned banks, but the 1997 Asian financialcrisis, Myanmar’s 2003 domestic banking crisis, and internationalsanctions severely impaired the development of the sector.Since 2011, policymakers have enacted a series of reforms meantto develop the financial sector as part of a wider agenda foraccelerating economic growth. The section below looks at some ofthe key measures of recent progress and then provides a currentlandscape of the major institutions in the sector, including bothprivate- and state-owned banks as well as their regulators. At theend of the document, Appendix 1 provides a current macroeconomicsnapshot, and Appendix 2 summarizes recent legal changes andother reforms affecting the banking sector.KEY INDICATORSTwo conclusions appear to emerge from the figures that areavailable for the banking sector.3 On the one hand, the data showsignificant growth over the last few years. On the other hand,the information available also strongly suggests that the bankingsector in Myanmar is still not adequately fulfilling its financialintermediation role for the economy.Over the last four years, the Myanmar banking sector has seenassets grow by about 22 percent annually, so that in March 2016, thebanking sector had 42,357 billion kyat in assets (or about US 31.64  MILKEN INSTITUTETHE BANKING SECTOR IN MYANMAR3Frontier market data are oftenincomplete, inaccurate, andirregularly updated. Data forMyanmar are no exception.The figures presented inthis document may onlypartially reflect on-the-grounddevelopments in a fledglingfinancial market.

EXECUTIVE OFTITLEOVERVIEWSUMMARYTHE BANKING SECTORbillion).4 This figure comes to about 55 percent of GDP, withdomestic banks managing over 95 percent of these assets.5Much of the sector’s growth has been driven by domestic privatelyowned banks, whose own balance sheets have expanded by over1,000 percent since 2010. In a notable development, the percentageof assets managed by privately owned and semi-private banks nowsurpasses those managed by purely state-owned institutions. Inearly 2016, privately owned banks held approximately 52 percent ofbanking assets, compared to around 48 percent held by state-ownedbanks.6 Privately owned banks, moreover, have much larger loanbooks than those managed by their state-owned counterparts. Inearly 2016, loans comprised an estimated 61 percent of assets heldby privately owned banks, compared to 15 percent of assets forstate-owned banks.7On the liability side of the balance sheet, privately owned bankshave similarly taken the lead on expanding the deposit base. In 2013,total deposits were split evenly between privately owned banksand state-owned banks, yet by 2016, 64 percent of total depositswere placed in privately owned banks.8 System-wide, deposits haveincreased from 7,010 billion kyat (about US 8.2 billion) in 2011-2012to 25,883 billion kyat in 2015-2016 (about US 19.2 billion). And thisgrowth is expected to continue. The International Monetary Fund(IMF) projects that deposits will nearly double from current levels to48,819 billion kyat by 2018-2019 (about US 36.4 billion at the presentexchange rate).9By most measures, however, and despite its recent growth, thefinancial sector in Myanmar remains underdeveloped comparedto its regional peers in the Association of Southeast Asian Nations(ASEAN). For instance, domestic credit to Myanmar’s private sectorhas grown from approximately 6 percent of GDP in 2011, to about18 percent in 2016. By comparison, however, the domestic credit tothe private sector is about 42 percent of GDP in the Philippines, 63percent in Cambodia, and 151 percent in Thailand.10 About 7 percent5  MILKEN INSTITUTETHE BANKING SECTOR IN MYANMAR4Kyat:USD conversions in thispaper are based on the UNoperational rates of exchangereported by the United NationsTreasury. As of the end of June2017, the exchange rate was 1360kyat to one U.S. dollar.5Thomas Foerch et al.,“Myanmar’s Financial Sector:A Challenging Environment forBanks,” Deutsche Gesellschaft fürInternationale Zusammenarbeit(GIZ), October 2016 (hereafter, GIZ2016).6Estimates vary slightly bysource. See, for example, GIZ2016 and also “Myanmar BankingSector 2025: The Way Forward,”Roland Berger, September 2016(hereafter, Roland Berger 2016).7Roland Berger 2016.8Ibid.9“Myanmar: Staff Report forthe Article IV Consultation,”International Monetary Fund,December 29, 2016.10World Development Indicators,World Bank, 2017.

EXECUTIVE OFTITLEOVERVIEWSUMMARYTHE BANKING SECTORof Myanmar businesses have accessed bank loans to financeinvestments, while around 11 percent have put bank loans to use asworking capital. Again, as shown in Table 1, along with additionalindicators, businesses located in other ASEAN countries tendto access bank financing at higher rates, though there are some11As a percentage of GDP, thisvolume of cash outside of thebanking system is larger thanfigures seen in Myanmar’sASEAN peers. The figure wasunder 10 percent, for instance, inCambodia, Laos, Malaysia, andThailand.exceptions.Table 1. Comparing the Myanmar Banking Sector to Its Regional PeersMyanmarCambodiaLaosMalaysiaThailandDomestic credit to the private sector, % ofGDP (2015)18.163.1N/A125.2151.3Bank nonperforming loans, % of total grossloans (2016)N/A2.6N/A1.62.9Depositors with commercial banks, per 1,000adults (2015)192.5N/A451.2834.21,198.0Borrowers from commercial banks, per 1,000adults (2015)3.3N/A28.2390.2319.4% of firms using banks to finance investment(most recent year available)7.12.515.935.315.3% of firms using banks to finance workingcapital (most recent year available) credit bureau coverage, % of adults(2016) credit bureau coverage, % of adults(2016) World Development Indicators, World Bank; Enterprise Survey-Myanmar 2016, World BankAs discussed further in Section 3 below, regional peers have alsoadvanced further toward financial inclusion goals than Myanmar.Part of what holds Myanmar back on this front is the enduringinformality of financial activity in the country. In 2016, the volumeof cash held outside the banking system was about 15 percent ofGDP, compared to the 30 percent placed in bank accounts. That is,individuals and businesses kept about a third of the currency incirculation in cash, not in deposit accounts.11 Likewise, according toa 2014 study, 52 percent of lending to individuals was originated byunregulated providers.12 These figures reflect a longstanding distrustof the banking sector in Myanmar, caused in part by the 2003banking crisis as well as past rounds of demonetization in the 1960s6  MILKEN INSTITUTETHE BANKING SECTOR IN MYANMAR12Doubell Chamberlain et al.,Myanmar Country DiagnosticReport: Demand, Supply, Policyand Regulation, Making AccessPossible, 2014.

EXECUTIVE OFTITLEOVERVIEWSUMMARYTHE BANKING SECTORand 1980s when the government, seemingly arbitrarily, declared thatbills in circulation would no longer be considered legal tender.13Privately owned banks buyand invest in land, leading to aconcentration of branches of thesame bank in a single area.STRUCTURE OF THE DOMESTIC BANKING SECTOR14Roland Berger 2016.15GIZ 2016.Today, there are 28 domestic banks operating in Myanmar. Thisnumber includes four state-owned banks, three banks owned bymunicipal governments, 10 semi-private banks that trade privatelybut are partially owned by, or closely associated with, governmentagencies, and 14 privately owned banks. Table 2 lists the country’sbanks by category, while Box A below provides brief descriptions ofseveral major banks.Among the privately owned banks, the so-called “Big Three”dominate the market. Combined, Kanbawza Bank (KBZ), AyeyarwadyBank (AYA), and Co-operative Bank (CB) control about two-thirds ofall loans, two-thirds of all deposits, and more than 50 percent of allbank branches in the country.13 The Big Three are also expandingmore rapidly than smaller banks, adding 60 new branches as agroup between August 2014 and May 2016, compared to only sevennew branches for the rest of the banking industry combined.14Although banking-sector concentration is typical in ASEAN, thelimited absolute size of Myanmar’s overall banking market makes itdifficult for the country’s smaller banks to become competitive.The four state-owned banks are Myanmar Economic Bank, MyanmarForeign Trade Bank, Myanmar Investment and Commercial Bank,and Myanmar Agricultural Development Bank. While distinct in theiroperational scope and policy mandates, these banks have severalchallenges in common.15 First, they lack transparency and often failto report financial performance data. Second, their policy mandatesappear to be outdated or unclear. Additionally, as is also the casewith their privately owned competitors, state-owned banks requiremajor investments in information technology and human capital.7  MILKEN INSTITUTETHE BANKING SECTOR IN MYANMAR

EXECUTIVE OFTITLEOVERVIEWSUMMARYTHE BANKING SECTORTable 2. Domestic Banks in MyanmarGovernment Banks(State-Owned)Government Banks(Municipality-Owned)Semi-Private BanksPrivately Owned BanksMyanmar AgriculturalDevelopment BankNaypyitaw Sibin Bank Ltd.Global Treasure Bank Ltd.Asia Green Development BankLtd.Myanmar Economic BankYadanabon Bank Ltd.Innwa Bank Ltd.*Asia Yangon Bank Ltd.Myanmar Foreign Trade BankYangon City Bank Ltd.Myanmar Citizens BankLtd.Ayeyarwaddy Bank Ltd.Myanmar MicrofinanceBank LimitedAyeyarwaddy FarmersDevelopment Bank LimitedMyawaddy Bank Ltd.*Co-operative Bank Ltd.Rural Development BankLtd.Construction and HousingDevelopment Bank LimitedSmall & Medium IndustrialDevelopment Bank Ltd.First Private Bank Ltd.Myanmar Investment andCommercial BankKanbawza Bank Ltd.Myanma Apex Bank Ltd.Myanmar Oriental Bank Ltd.Shwe Rural and UrbanDevelopment Bank LimitedTun Foundation Bank Ltd.United Amara Bank Ltd.Yoma Bank Ltd.Source: CBM, USAID 2016*Denotes military ownership8  MILKEN INSTITUTETHE BANKING SECTOR IN MYANMAR

EXECUTIVE OFTITLEOVERVIEWSUMMARYTHE BANKING SECTORBox A. Myanmar’s State-Owned and Key Privately Owned BanksThe Four State-Owned BanksOf the four state-owned banks, the Myanmar Economic Bank (MEB) has the widest potential reach to extend credit tothe real economy, including in many rural communities. With around 9,000 staff across about 350 branches, the MEB16provides a wide range of commercial banking services. However, loans to the private sector account for less than 10percent of the bank’s total assets. The MEB mainly buys government treasuries and acts as a financier for state economicenterprises, including the Myanmar Agricultural Development Bank, often at discounted rates. A 2013 audit concludedunsurprisingly, but dramatically, that the MEB has been losing money since as early as 1990.The Myanmar Investment and Commercial Bank (MICB) and Myanmar Foreign Trade Bank (MFTB) previously controlledmuch of the foreign exchange market by rationing forex supplies and playing a supervisory role in forex trading. Thetwo banks now act mainly as vehicles for the foreign exchange deposits of government departments and state-ownedenterprises. Both also, though, provide financial services to the private sector, including domestic commercial andinvestment banking services.The Myanmar Agricultural Development Bank (MADB) serves rural areas through providing short- and long-term creditfor agricultural, livestock, and other rural enterprises. Altogether, the bank has close to 2 million clients, served by about2,500 staff across 230 branches.17 However, the MADB has been described as being in “perhaps the worst shape of allthe state-owned institutions,” mainly due to its concentration in only a few crops and its artificially narrow interest ratemargins.18 The MADB’s role in agricultural finance is explored further in Section 3 below.The “Big Three” Privately Owned Banks (Plus One)KBZ Bank, established in 1994, is the largest bank in Myanmar by far, with assets of around US 8 billion, three timeslarger than the next biggest bank, and with nearly twice the number of branches and employees as any privatecompetitor. KBZ was also the first bank to issue its own branded credit card after the central bank authorized theirreintroduction. AYA Bank is the second-largest private bank. It is the first to be compliant with International FinancialReporting Standards and is the first to be audited by one of the four major global accounting firms. The third largestbank, CB Bank, resulted from a merger of three state-owned cooperative banks, managed at the time by the Ministryof Cooperatives. There are no longer any formal ties between the government and CB Bank, but informal ties throughleadership and staffing remain.Although not comparable to “Big Three” banks in terms of size, Yoma Bank plays a key role in expanding access tofinance in Myanmar. It was the second biggest private bank before the 2003 banking crisis, but after the crisis, Yoma’slicense was restricted such that the bank was only allowed to provide remittance services. In 2012, Yoma recoveredits full banking license and is now seen as one of Myanmar’s most internationally integrated financial institutions.Yoma focuses on serving small- and medium-sized enterprises (SMEs) and has worked with the International FinanceCorporation to extend new loans to SMEs as well as partnered with Telenor, a Norwegian telecommunications company,to develop mobile money products.Source: CBM, USAID 2016BANKING-SECTOR REGULATORS1Under the 2013 Central Bank of Myanmar Law and the 2016 FinancialInstitutions Law (FIL), Myanmar established the independence of theCentral Bank of Myanmar (CBM) as the banking-sector regulator, andhas put into place a framework to meet international best practicesin banking supervision, including those found in the Basel CorePrinciples. For semi-private and privately owned banks, the CBMnow acts as the sole supervisory authority for licensing, regulating,and enforcing compliance in the banking sector. However, in terms9  MILKEN INSTITUTETHE BANKING SECTOR IN MYANMAR617Ibid.Ibid.18See pp. 31, 57-59, SeanTurnell, “Banking and Financein Myanmar: Present Realities,Future Possibilities,” UnitedStates Agency for InternationalDevelopment, January 2016(hereafter, USAID 2016).

EXECUTIVE OFTITLEOVERVIEWSUMMARYTHE BANKING SECTORof mandate and policy direction, though, the four state-owned banksstill fall under the purview of the Ministry of Planning and Finance(MOPF).19In July 2017, 18 months after the passage of the FIL, the CBMissued new regulations to implement several Basel II standards.In particular, the CBM established a minimum liquidity ratio of 20percent and required banks to calculate liquidity daily and reportfigures weekly to the CBM. The new regulations also mandatedthat banks maintain a capital adequacy ratio of 8 percent, with aminimum Tier 1 ratio of 4 percent. The CBM also set the limit onlending exposure to any single counterparty at 20 percent of capitaland reserves, though state-owned banks remain exempt from thisrequirement when lending to government entities.20 The degreeto which Myanmar should adhere to all Basel standards—and theimplications of partial adoption—remain an area of discussion forthe banking sector, its regulators, and international observers.10  MILKEN INSTITUTETHE BANKING SECTOR IN MYANMAR19The MADB only recently movedunder the jurisdiction of theMOPF. It had previously been partof the Ministry of Agriculture,Livestock, and Irrigation.20CBM notifications issued onJuly 7, 2017.

CHALLENGES TO BANKINGSECTOR DEVELOPMENTRecent reforms have advanced financial-sector development inMyanmar, but aspects of the regulatory environment still do notconform to international best practices. This is particularly the casein regards to a number of administrative controls on bank lending.This section discusses those regulatory constraints and examinesthree other priorities for banking-sector development in Myanmar:improving the payment infrastructure, developing the money andinterbank markets, and determining the right pace for the furtherexpansion of foreign banks.CONSTRAINTS ON BANK LENDINGA number of current administrative controls likely impede thebanking sector from expanding access to credit and other financialservices in Myanmar, while doing little to reduce the bankingsystem’s vulnerability to shocks. The most prominent of theserestrictions is the current interest rate policy, whereby the CBM setsa fixed bandwidth for deposit and lending rates based on the CBMreference rate. Other important past constraints have included a limiton lending set at 80 percent of a bank’s deposit base, strict collateraldemands on borrowers, and the requirement that lending terms donot exceed one year.At present, the CBM sets a cap on lending rates at 3 percent of theCBM reference rate and puts a floor on deposit rates at -2 percentof the reference rate.21 Such non-market-based rates raise severalpotential challenges. The first is that both depositors and lendersmay experience losses in real terms during periods of high inflation,as has occurred many times in Myanmar’s past, including recentlyfor depositors in 2015 (see Figure 1).22 Second, interest rate controlslimit the degree to which banks can compete on the basis of therates they offer. As one report from the German governmental think11  MILKEN INSTITUTETHE BANKING SECTOR IN MYANMAR21The policy was even stricter inthe past. The CBM previouslymandated specific rates, thenloosened to a two percentagepoint band in 2011, beforeadopting the current policy in2012.22Consumer prices rosesignificantly as a result of extremeflooding caused by CycloneKomen in July 2015.

EXECUTIVE SUMMARYTITLECHALLENGESTO BANKING-SECTOR DEVELOPMENTtank GIZ concluded, “currently banks mainly compete by means oftheir service provision and their physical presence in the market.”23GIZ 2016.23However, these same restrictions may inhibit banks from expandingservices and lending down-market, particularly to rural populationswhere operational costs are likely to be higher.24See pp. 5-6, Roger ThomasMoyes and Kenneth Shwedel,“Myths and Maths: The Impactof Financial Regulations onAgriculture in Myanmar,” MekongBusiness Initiative, May 1, 2017.Figure 1. Fixed Interest Rates and Inflation, 2011 to 201614%12%10%8%6%4%2%0%20112012Central bank reference rate2013Lending rate (max)2014Deposit rate (minimum)2015Inflation, average consumer pricesSource: CBM, IMFUp until 2013, Myanmar banks also operated with a cap onaggregate bank lending. Banks could only make loans with anaggregate value of up to 80 percent of their deposit base. Theresult was that banks tended to concentrate their lending amonglarger corporations. In addition to the lending limit, deposits werenot allowed to exceed the amount of 25 times paid-up capital. Thisrequirement impeded banks from mobilizing savings from a largernumber of households to fund their loan portfoliosLending in Myanmar generally follows strict collateral requirementsthat also impede credit creation. Until 2013, land was the onlyacceptable form of collateral, but the CBM has expanded this toinclude gold, diamonds, machinery, some agricultural crops, fixeddeposit accounts, and government bonds. In practice, however,there is widespread confusion on this point,24 and banks oftencontinue to demand land as the sole acceptable collateral. Moreover,the banking sector has tended to demand an extraordinary amount12  MILKEN INSTITUTETHE BANKING SECTOR IN MYANMAR2016

EXECUTIVE SUMMARYTITLECHALLENGESTO BANKING-SECTOR DEVELOPMENTof overcollateralization by international standards—often exceeding200 percent of loan value.Finally, as result of past legal requirements (now lifted), banksfrequently limit loan terms to one year, so that businesses haveno way to finance longer-term investments in their growth and/orexpansion. While only a minority of Myanmar firms have receiveda bank loan, one study found that around 80 percent of corporateborrowers would prefer to have access to loans for terms of betweenone and five years.25THE NATIONAL ELECTRONIC PAYMENT INFRASTRUCTUREOne of the fundamental obstacles to financial-sector developmentin Myanmar is the country’s heavy reliance on cash as the basisfor financial transactions. As in any country, the dominance ofcash can hold back economic development by slowing the pace offinancial transactions, increasing transactions costs, and creatingopportunities for corruption. In Myanmar, as recently as 2014,virtually all salary payments, utility payments, and governmenttransfers were made in cash.26 Until recently, bank transfers, evenbetween branches of the same bank, frequently involved physicallytransporting sacks of cash from one location to another.27 Checksalso cleared manually, increasing the risk of errors and delays.The past few years, though, have been a period of reform andprogress. The government has worked closely with the JapaneseInternational Cooperation Agency to implement an automatedclearance system for the CBM. The resulting CBM-Net, the country’sfirst real-time gross settlement (RTGS) system, became operationalon January 6, 2016. At around the same time, the governmentpassed the Financial Institutions Law, which empowers the CBMto issue regulations for an electronic payment system and to givethe banking sector instructions for installing electronic paymentinfrastructure. Currently, CBM-Net facilitates large transactions13  MILKEN INSTITUTETHE BANKING SECTOR IN MYANMAR25See pp. 47-48, Miriam Amineand Reinhard Stockmann, Smalland Medium Enterprise Survey,Myanmar 2015, German Institutefor Development Evaluation(DEval), August 2015.26According to the World Bank’sGlobal Findex, only 0.4 percent ofMyanmar citizens over 15 yearsof age had used a bank accountto receive wages and governmenttransfers, a figure that fallsbelow the 3.2 percent and 1.0percent global averages for thesemeasures among low-incomecountries. No Myanmar citizens,according to the same source,had used a financial institution tomake utility payments, comparedto a 0.9 percent average forlow-income countries.27Steve Gilomore, “CBM bringsreal-time settlement to banks,”Myanmar Times, January 12,2016.

EXECUTIVE SUMMARYTITLECHALLENGESTO BANKING-SECTOR DEVELOPMENTbetween banks, but there are plans to expand its use to interbankforeign exchange auctions and for trading government bonds.had, as of 2016, joined the global SWIFT messaging system.All of this activity signifies real progress, but not all banks haveimplemented electronic payments. Most, in fact, operate with a mixof ad hoc electronic and cash-based systems. Furthermore, about aquarter of banks still do not have a SWIFT code.On the retail side, the number of ATMs in the country has grownrapidly, from several hundred in 2013 to near 1,700 by early 2016.29During the same time, the number of point-of-sale (POS) terminalshas quadrupled, from about 700 in 2014 to over 2,800 in 2016.30The Myanmar Payment Union (MPU) can claim much of the creditfor these advances. The business association, which has 23 outof 28 Myanmar banks as members, has also been successful inimplementing a national payment switch to facilitate non-cashpayments and transfers. The MPU has also spearheaded theexpanded use of debit and credit cards, with MPU members issuing1.1 million debit cards between 2012 and 2015.31 Mastercard andVisa are both partnering with MPU members to issue co-brandedcredit cards, with CB Bank leading much of this engagement.32Again, comparisons with other ASEAN countries help put thesedevelopments in context. Myanmar remains behind its regionalpeers on a number of important indicators, with about two ATMsper 100,000 people, for example, compared to 32 in Laos or 114in Thailand.33 Naturally, the use of debit and credit cards requireshaving a bank account in the first place, which is a service that thevast majority of Myanmar’s citizens—more so than in neighboringLaos or Thailand, for example—still do not have (as discussed inSection 3). As a further matter, Myanmar still has not established a14  MILKEN INSTITUTETHE BANKING SECTOR IN MYANMARGIZ 2016.28Parallel to these developments, three-quarters of Myanmar bankscredit bureau, an issue discussed in greater detail in Box B.2829Doubell Chamberlain et al.,Myanmar Country DiagnosticReport: Demand, Supply, Policyand Regulation, Making AccessPossible, 2014; GIZ 2016.30Ibid.31Zaw Lin Htut, “Retail Payment:Current Status and Beyond,”in Collection of Papers onMyanmar’s Financial Sector,GIZ-Myanmar and Thura Swiss,January 2016.32Motokazu Matsui, “Myanmarlures Visa, other foreign creditcard issuers,” Nikkei AsianReview, February 8, 2017.33World Development Indicators,World Bank, 2017.

EXECUTIVE SUMMARYTITLECHALLENGESTO BANKING-SECTOR DEVELOPMENTBox B. Establishing a Credit Bureau in MyanmarA credit information bureau contributes to expanding financial access for individuals by allowing banks and otherfinancial institutions to make credit decisions based on past repayment performance, not solely on the collateral aborrower can put up. Though Myanmar has not done so to date, most ASEAN countries have established either a privateor public credit bureau that collects information from various creditors, including banks and microfinance institutions.In Laos, for example, a private credit bureau covers around 11 percent of the population, while the credit bureau inCambodia maintains credit histories for about 44 percent of the population there.Myanmar, working closely with the World Bank Group and the International Finance Corporation, is in t

surpasses those managed by purely state-owned institutions. In early 2016, privately owned banks held approximately 52 percent of banking assets, compared to around 48 percent held by state-owned banks.6 Privately owned banks, moreover, have much larger loan books than those managed by their state-owned counterparts. In