Myanmar’s Financial Sector: A Challenging Environment for Banks

The financial sector in Myanmar is the least developed of all countries in Southeast Asia and cannot adequately fulfill its role as a financial intermediary. However, due to the recent reform process, the sector has already undergone tremendous changes. Steps to develop a stock market in late 2015 are underway, and the insurance market, formerly monopolized by the state, has been liberalized. Nevertheless, capital and insurance markets still play a minor role, and the financial sector continues to be dominated by banks. While state-owned banks currently account for the majority of assets, they are struggling to maintain pace with the speed of reforms and high growth rates of their private sector peers. Given the low level of development of the banking sector and the size of the potential market, growth potentials continue to look promising.

Despite current reforms, the legal framework as well as the financial infrastructure of the banking industry lags behind international standards. The main challenges ahead for the banking sector are the management of the reforms including the pace thereof, the development of human resources and the trust of the public. These challenges become even more important when taking into consideration the two facts that foreign banks will enter the market by late 2015 and that Myanmar will join the single market of ASEAN Economic Community at the end of 2015.

This paper aims at providing an overview of the financial sector in Myanmar and will focus particularly on the banking industry.