KBZ Group on Myanmar’s developing banking sector

Transcript

Economically-speaking, Myanmar’s major challenge is to create a fully developed financial system. World Finance speaks to KBZ’s Nyo Myint, Kim Chaw Su and Myint Yu Yu Khine to speak about how the banking sector is developing in the country.

World Finance: Well Nyo Myint if I might start with you, Myanmar’s banking sector is still underdeveloped, so what is the penetration rate and what needs to be done for further development?
Nyo Myint: Over the last two years, the liberalisation of the banking sector in Myanmar has witnessed explosive growth in terms of deposits, loans and customers. Customer penetration is now 20 percent, which has also doubled.

The Central Bank of Myanmar, together with other financial institutions, has stepped up its efforts to ensure this important sector develops at a pace that will support the economic growth. The Central Bank of Myanmar should continue its tight supervision of the financial institutions, to ensure the banking sector is well managed.

World Finance: Kim, how have government reforms benefitted the sector?
Kim Chaw Su: The McKinsey international organisation has predicted growth to be over eight percent. So the banking sector like any other sector in Myanmar is actually going through a process of transformation. We are talking about upscaling our human capital, ensuring that the financial regulatory compliance is there and making sure that everything is moving towards acceptable international practices.

Over the last two years, the liberalisation of the banking sector in Myanmar has witnessed explosive growth in terms of deposits, loans and customers

World Finance: Well Yu Yu, with nine foreign banks going to start operating in the country, what are local banks doing to stay competitive?
Myint Yu Yu Khine: It is a positive step that will benefit the industry, and Myanmar banks like Kanbawza Bank have also established a strong franchise in consumer and SME lending taking one third of the market share. So in terms of retail banking we have a dominant channel in bank branches and we are also expanding to electronic channels in terms of the wholesale banking, transaction banking, trade financing and cash management services.

We are also trying to build up our capabilities so we are ready to face the competition.

World Finance: Well Kimmore generally speaking, what sectors will be driving Myanmar in the coming years?
Kim Chaw Su: Myanmar is open for business so every sector needs to be developed. In the financial sector we have actually given foreign banks licences to operate. In the Telco sector in the last two years the government has given licences to Ooredoo and Telenor to actually operate, so that they come and build the infrastructure we badly needed.

In terms of developing within the special economic zones, the government is working with people from every sector to ensure that Myanmar is receiving the attention that it needs in terms of investment and growth opportunities as well as helping us to upscale our human capital and gain more investments for the future.

World Finance: Well Yu Yu, what are the challenges for foreign investors and what can be done to improve the situation?
Myint Yu Yu Khine: The foreign investors coming to Myanmar today may need to expect the infrastructure to be poor in terms of power generation distribution, telecommunications and transportation. There are also opportunities for them to contribute to these sectors.

And another issue would be the rental property market where we have more demand than supply. I think the government should establish new industrial zones and also new satellite towns near the city areas. And we have another big challenge which is the lack of skilled labourers.

World Finance: Well Nyo Myint, finally looking to the year ahead what are your priorities?
Nyo Myint: Well the further liberalisation of the banking sector in Myanmar and the entry of the foreign banks are expected to force local banks to reposition themselves for this change. And for Kanbawza we have prepared ourselves for this change for two years now. So the focus for the next two months is to strengthen our consumer banking business with new innovate product offerings as well as further enhancing customers’ experiences and also to build up our capabilities in regards to wholesale banking.

We have to leverage on our IT investment in order to enhance our transactional banking services in the area of trade financing, cash management services and operational efficiency. We would like to continue with our human capital initiative to enhance our HR capabilities; and lastly we have to collaborate more intensively with foreign banks in order to acquire technical know how and networks.

World Finance: Nyo Myint, Yu Yu, Kim: thank you.
Nyo Myint, Kim Chaw Su, Myint Yu Yu Khine: Thank you very much.