Still, they are prohibited from providing basic retail transactions amidst the reform.
Burmese banks are ramping up long-overdue reforms to rehabilitate its underdeveloped financial sector which includes a move enabling seven of 13 foreign banks to provide export financing services, according to a report from ASEAN briefing.
This puts foreign banks at par with their local, state-owned counterparts and is also seen as significantly benefitting small businesses as they can now enjoy additional options to access credit at more competitive rates.
“The decision is a welcome development as Myanmar’s banking system has been highly restrictive for foreign players. Besides providing export financing services, the select foreign banks will be allowed to extend credit to foreign businesses as well as local banks,” ASEAN Briefing noted.
However, reforms to liberalise Myanmar’s banking sector could face resistance especially against a general preference for state-owned banks and heavy restrictions on foreign involvement in financial transactions.
For instance, whilst foreign banks are now allowed to offer export financing services, they are still prohibited from providing basic retail transactions like account openings, local money transfers, and loan extensions denominated in local currencies.
International banks could only operate in Myanmar via joint venture agreements with local banks or assist foreign-invested companies. Such banks are also restricted to just one branch per banks and are mandated to invest a minimum paid-up capital of $75m.
“Considering the lack of liquidity in local private banks in Myanmar, this move offers much-needed relief to the trading community and provides a more conducive business environment. It is, however, only a first in a series of necessary reforms that must be pursued by the government to secure Myanmar’s appeal for foreign investors and the international banking sector,” the report concluded.
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