Is Myanmar ready to move beyond a cash-based society?

Piles of cash lay on the floors of the bank we were visiting in Yangon. Such a site reminded my group of finance and banking experts that Myanmar’s entire economy is effectively still a cash-based society.

The lack of credit financing is also a problem, with banks able, at best, to offer loans for up to one year based on collateral to the value of the loan (effectively limiting it to cash or 50% of the gold value deposited with the bank). This is just one example of tight banking restrictions in the country that limit credit growth. It is why everyone still pays with piles of cash.

CB Bank was first set up as a private bank in 1992 and it is among the largest in the country, which currently has four state-owned banks and 19 private banks. No foreign banks are allowed at the moment, but Myanmar has committed to allowing foreign banks to establish wholly-owned operations ahead of its integration with ASEAN in 2015. In anticipation, 17 foreign banks have opened local representative offices in the country.

On the other hand, Myanmar has taken small steps to integrate with the outside world by trying to establish an independent central bank. Without a functioning credit system, the country is limited in its growth prospects. A cash-based economy can lead to other related problems such as corporate frauds and an under declaration of income that will reduce much-needed tax revenues.

The YGL community shared the vision that with its combined expertise, they could propose initiatives to help the country move forward. Microfinance could be one of the key development tools to promote financial inclusion and alleviate poverty in Myanmar. This is something that the community is exploring.

Author: Tan Chin Hwee is Co-Head, Asia-Pacific of Apollo Global Management, and a 2012 Young Global Leader.

Image: Workers count Myanmar’s kyat banknotes in Yangon REUTERS/Soe Zeya Tun