COLOMBO: Sri Lanka’s third largest private sector commercial bank last week said it had already applied for a representative office in the South East Asian democracy, Myanmar, becoming the second such Sri Lankan bank to do so.
Back in 2013, Commercial Bank PLC applied for commercial banking license to set up a representative office in Myanmar for which it received the license in November 2014 becoming the first Sri Lankan bank to test the waters in an economy gradually opening up its doors for foreign firms.
“We have already made an application to a country (Myanmar) for which we have the Central Bank approval. That application is under consideration at the Central Bank of that particular country,” said Sampath Bank PLC CEO, Aravinda Perera.
Hefty initial capital requirements by the Central Banks of other South Asian countries such as India, Bangladesh and Pakistan have made inroads to such countries difficult but Myanmar, due to its liberal policies in recent times, has prompted Sampath Bank to make an application.
Perera is hopeful that he will receive a response from the Myanmar government within the next three months.
“The Central Bank of Myanmar has told that it (the application) should be taken up for final Cabinet approval within the next three months,” he told shareholders during the bank’s Annual General Meeting, in response to a question by a shareholder.
After decades of military rule, Myanmar is making progress in its economic liberalization process, and the country offers tremendous opportunity for many sectors for business.
A number of multinationals have already set up their operations or about to enter into the market of 51 million people.
Myanmar is the world’s most underbanked country. Only 4 percent of the citizens surveyed had savings accounts in their own names, according to a study by United Nations.
International Finance Corporation in 2013 estimated that only less than 20 percent of the population have access to financial services.
By the first week of October, Myanmar had offered licenses to nine foreign banks, but the country still lacks sound laws (such as bankruptcy law) and a stronger legal framework for the financial sector.
International Monetary Fund forecasts 8.5 percent growth for the Myanmar’s economy for the next few years. Bank loans of the economy comprise of just 19 percent of GDP, much less than 36 percent in Cambodia and 108 percent in Vietnam.
Weak credit protection and tight restriction on lending to local companies will somewhat undermine the prospects in Myanmar for foreign banks. The license terms cap the operations to one branch and it also limits the new comers to offer foreign currency loans to only non-Myanmar firms.
However, a local banking presence will ease the banking and financing issues for Lankans who seek to expand their business operations in to Myanmar.
