Myanmar is located in Southeast Asia and borders China, Thailand, India, Laos and Bangladesh. Unlike its regional neighbors, Myanmar’s financial sector is downright inferior in terms of development largely due to the legal environment. A study by Duflos et al (5) identified multiple issues of concern relating to the prevailing rules, regulations and procedures that characterize the business environment affecting the country’s financial sector. Although revolutionary changes are underway, Myanmar’s financial sector is subjected to a tough legal and regulatory environment as well as procedures.
Government intervention has been the perennial cause of mishaps facing the sector. Duflos et al (4) observed that state-owned banks dominate the sector by constraining the private sector and limited support of NGOs. Foreign competition is closed thanks to the country’s Financial Institutions Law and therefore completion is locally spearheaded by state-owned banks. Most of the agencies’ and central bank’s practices are unfavorable for a healthy financial sector as indicated by such dubious restrictions as a 13% maximum loan rate, limitation on banking products and services, limited application of technology and restricted insurance services.
Risks are widespread throughout the sector and the matter is aggravated by the presence of an underdeveloped single state-owned insurance company. The prevalent informal sector in the rural areas heavily regulated private banks and underdeveloped state banks imply the presence of high risks in the country’s financial sector. According to Duflos et al, private banks opt not to extend their services to the low-income population, or even attempt to meet the overwhelming demand in the rural areas because of the unfavorable laws and state requirements. Poor governance has also resulted in bogus financial reporting across the sector. The reforms that have been initiated in Myanmar will take a long time to update the country’s financial sector to current practices.
Works Cited
Duflos Eric, Luchtenburg Paul, Ren Li & Chen Y. Li. Microfinance in Myanmar. [IFC Advisory Services in East Asia and the Pacific] 2013. Web. Retrieved 20 March 2013.
