ADB’s Trade Finance Program (TFP) provides guarantees and loans to banks to support trade. ADB Investment Specialist Janet Hyde discusses latest developments in TFP’s work in Myanmar.
Asian Development Bank
Q: What are the latest TFP activities in Myanmar?
We’ve just received approval for two banks to join the Trade Finance Program bringing the total for Myanmar to four. We’re hoping that the facilities will be operational soon and once the documentation is signed we can make a further announcement.
But in the meantime, we are continuing with our bespoke training program for Trade Finance banks with the aim of building an efficient and a cohesive trade finance franchise for them. We are looking at making recommendations for the operations team for the credit risk management and for the relationship and sales teams.
We’ve also received an enthusiastic response to our efforts to hone the HR policies of some of the banks. Particularly with regard to the role of women and their progress in the workplace.
Q: How has the lifting of OFAC sanctions affected Myanmar’s banking sector?
There’s been no further announcements from OFAC since the lifting of the sanctions last year and the indications are that the current administration won’t be reversing that action. But, we have to say that the response from the US banks has been somewhat muted and we think that they’re mainly waiting for changes in financial sector reform and that the implementation of AML and KYC standards to take effect first.
Having said that, we have received a number of inquiries, an increasing number of inquiries from the banks in the Asia region and we’re also supporting our partners in Western Europe and Scandinavia with introductions to the banks in Myanmar and supporting their due diligence processes.
Q: What other changes have been impacting the banks of Myanmar recently?
Banking regulation and law has retained largely unchanged in Myanmar since 1990 until the passing of their financial institutions law early in 2016, which allowed banks to lend on unsecured basis for the first time in decades and also introduced new standards of corporate governance.
In July 2017, the Central Bank of Myanmar also introduced new regulations regarding capital adequacy, asset quality, liquidity managements, and large exposures; and this is the first step towards international standards and eliminating the practices that built up during the years of military rule.
The banks have been experiencing some pressure given the rapid expansion of their branch networks in recent years. The money that they’ve been investing in digital forms of banking and e-commerce and due to maturing loan portfolios. They’re responding to the regulatory changes well but it’s clear that further capital investments will be needed especially given that the interbank and capital markets are not fully pledged in the country and safeguards to finance foreign investors still need to be put in place.
Overall, we are expecting a slow phase of change within the country given that the government is getting to grips with a wide-ranging program of economic, social, and legal reform.