Myanmar is currently developing its nascent finance sector, to boost national economic growth. Global financial body the World Bank recently signalled its support for these efforts, by announcing it will provide a loan to bankroll the Myanmar Financial Development Project. Htet Tayza comments.
Myanmar’s finance sector is small, but it has serious potential. Currently 77% of people in Myanmar do not have a bank account, depriving them of access to financial services. Meanwhile, statistics quoted by World Finance, an industry portal indicate that financial services currently contributes just 10% to Myanmar’s gross domestic product (GDP), however this is expected to rise to 20% by 2020.
The digital revolution is set to change Myanmar. The growing financial technology (fintech) sector will provide the solutions unbanked people in Myanmar require access financial services, which is why the sector’s contribution to GDP is projected to double by 2020. In a recent interview, Htet Tayza noted that there is “huge” appetite for fintech in the country, so it could really drive financial progress.
Developing the sector
Government authorities in Myanmar are also increasingly taking a role in cultivating the country’s financial industry. It’s Ministry of Planning and Finance, as well as its Central Bank, for example, are now looking to implement their Myanmar Financial Development Project, which is designed to create the robust, stable financial market that the country requires to promote financial inclusion.
The Myanmar Financial Development Project includes several targets. It should grow the nation’s banking market, improve financial and loan services, and promote improvements for Myanmar’s small-scale financial firms and insurance companies. Some of the Project’s core goals include promoting robust financial institution laws in Myanmar, improving government bank services and supporting the growth of financial services, to make it easier for small businesses to acquire financing.
Funding the plan
The Myanmar Financial Development Project is a collaborative effort with the World Bank. It has just announced, according to Myanmar Times, a national news outlet, that it will provide a US$100 million loan to bankroll the project. The loan, which will be taken from the World Bank International Development Association’s fund for developing nations, also comes with a low rate of interest.
Under existing regulations, the World Bank usually levies a service charge of 0.75% per year on these types of funding vehicles. However, this charge will be waived for a six year period, allowing Myanmar to maximise this capital to develop its finance sector. Also, the repayment period for this loan is 32 years, so the long-term loan without interest could last for a total of 38 years. Therefore, Myanmar will be able to focus on advancing its finance sector, without worrying too much about repayments.
Scaling new heights
It is hard to underestimate the role that financial inclusion plays in economic growth. If citizens have access to financial services, it is easier for them to buy goods, as well as manage their money and take out loans, which they can utilise to execute big-ticket transactions, and all of this floods capital into a national economy. Myanmar has a lot of economic potential, as it has recorded economic growth rates of +6% per annum since 2012, but it must up financial inclusion to tap this potential further.
The Myanmar Financial Development Project could promote greater financial inclusion in Myanmar. It may provide the nation with the financial infrastructure, most notably strong regulation, it requires to expand offerings to consumers, especially with the rise of fintech creating more solutions for people in Myanmar to utilise to manage their money than ever before. The World Bank’s funding could ensure that the Project has the support it needs to succeed and spur economic growth across Myanmar.