One of three state-owned financial institutions recently taken off the US sanctions list says it has made a concerted effort to upgrade its services since the current government took power in April, under instruction from the Ministry of Planning and Finance.
Myanma Foreign Trade Bank, established in 1976, held a monopoly on the foreign exchange market and trade financing for many years, but when the market was liberalised in 2012 the archaic state bank quickly lost market shareto more competitive and efficient commercial lenders.
As part of the new finance ministry’s 100-day plan, MFTB was asked to offer new services and remove restrictive policies, said deputy general manager Daw Myint Myint Maw in an interview with The Myanmar Times.
While the bank is among the best-known in the country with more than 100,000 account holders, it has just a single branch in Yangon, where it has now opened an information desk for customers.
For years under the former government even the smallest customer request had to be approved by a managing director, but since April decision-making power has been extended to manager level, said Daw Myint Myint Maw. This has significantly improved efficiency – requests that previously took three days to process can now be approved in half a day.
Customers are also now able to open current accounts, where they can deposit kyat. Traders can also make payments for imports in kyat, at a rate set by the bank, a change which should reduce the currency exchange risk for customers, Daw Myint Myint Maw said.
“This is to protect against currency volatility and reduce the difficulties [for the customer] of buying massive amounts of US dollars,” she said.
Until recently, MFTB was run almost entirely manually, which meant that importers and exporters had to visit the bank in person each time they wanted to make or receive a payment. As individual withdrawals were often limited to $10,000, it could take between 10 and 15 working days to take out enough money to pay for a shipment of imports.
In May, at the request of the finance ministry, the bank opened its first cash point. Located in Yangon International Airport, this is the first multi-currency ATM in Myanmar, Daw Myint Myint Maw said. In addition to cash withdrawal services, customers can insert US dollars and other currencies into the machine and receive kyat in return.
The bank has no plan to open other ATMs, as it has no other branches, she added, but has started issuing debit cards which can be used to withdraw money from machines operated by other banks.
A decision by the US Treasury in May to remove MFTB from its list of Specially Designated Nationals means that the bank can now handle US dollars freely. Two other state lenders, Myanma Economic Bank and Myanma Investment and Commercial Bank, were removed from the list at the same time.
All three banks have been using euros and other international currencies instead of US dollars for trade payments for more than a decade since sanctions were imposed in 2003.
“As soon as sanctions were removed, many of our old customers came back to us and opened new accounts,” said Daw Myint Myint Maw.
Senior officials are also starting to reach out to US banks more than a decade after their relationships were when sanctions were imposed on Myanmar. MFTB is also in discussions with Singapore’s Oversea Chinese Banking Corporation (OCBC), which may provide help to upgrade their services, Daw Myint Myint Maw said, though declined to provide further information.
As commercial banks have improved their services and adapted quickly to increased competition with the help of foreign banks, which entered the market in 2014, Myanmar’s four state lenders have largely been been left behind.
The International Monetary Fund and the World Bank have advised the government on options for modernisation through policy reform or mergers, but progress has been slow.
New banking laws will set the bar higher than it has ever been for financial institutions in Myanmar and while MFTB has raised its paid-up capital to K20 billion in line with the new rules, it will struggle to meet new reserve ratio requirements – the percentage of a bank’s deposits that it must hold on to and not lend out, said Daw Myint Myint Maw.
Responding to accusations by commercial lenders that state banks have beenunwilling to participate in the interbank foreign exchange market, and have been hoarding US dollars, she said the bank needs its reserves in order to ensure timely payments to foreign partner banks.
“The Central Bank has urged us to sell our US dollars to them at their daily auctions in the past, and we have obliged, but the Central Bank is unable to fulfil our [foreign currency] requirements when we need it,” she said, adding that the Central Bank only returns around 10pc of the US dollars it is sold.
“The other difficulty is that we have to pay US dollars to foreign banks even though our importers are paying by kyat,” she said.
Source: The Myanmar Times
