Thu 6 Sep 2012
Filed under: Business / Trade,News
Myanmar inched closer to rejoining the global financial system Thursday as MasterCard Inc. said it had issued a license to one of the country’s largest banks.
For a country that has no credit cards and only introduced ATMs less than a year ago, the introduction of the ubiquitous financial brand is a milestone. By giving travelers the ability to withdraw money at cash points and allowing merchants to accept credit cards issued by foreign banks, it will potentially save business people and tourists from having to carry thousands of dollars in local currency on trips to the country, as many do now.
Myanmar installed its first ATMs last year. MasterCard’s licensing deal with a local bank is another step in the country’s development.
The move comes as international financial firms are lining up to get back into Myanmar, which has become arguably the world’s sexiest new frontier market.
Standard Chartered, Citigroup Inc., Australia & New Zealand Banking Group Ltd. and a host of other Western and Japanese financial firms have expressed interest in Myanmar. Several Asian banks have opened representative offices this year.
The potential prize is access to one of the world’s last undeveloped financial markets, with some 60 million residents, of whom only one million use banking services after decades of living under an oppressive regime.
Millions more Myanmar citizens live overseas, creating a potentially giant remittances trade. And there are opportunities to serve multinational firms as they return to the country and set up offices or factories.
“If a bank wants to consider itself a major Asia-Pacific bank, you want to be able to provide clients with access to funding in that market,” said Michael Werner, a bank analyst at Bernstein Research in Hong Kong.
After years of international isolation, Myanmar is being eyed by foreign banks and financial services firms.
But those companies also face a tough road, as Myanmar officials and local lenders argue over when to let the foreigners in—and under what conditions.
Myanmar used to be one of Asia’s leading financial centers, and the city of Yangon still has rows of imposing, colonnaded foreign bank offices from the 1930s, many of which are now abandoned or rotting away in the monsoons.
The country nationalized its foreign banks in the 1960s, after a military junta took over and imposed socialist policies that left the country among the poorest in the world. A new, nominally civilian government took power last year and has pushed through sweeping reforms. Western leaders have eased sanctions that block investment in the country, though the U.S. still bans Myanmar imports and maintains other restrictions.
For financial firms, infrastructure concerns remain, particularly around the availability of a reliable flow of electricity, which is crucial for running ATMs and point-of-sale terminals.
Nevertheless, Vicky Bindra, MasterCard Worldwide’s president for Asia-Pacific, the Middle East and Africa, said many international banks—MasterCard Worldwide’s key clients—have been exploring opportunities to expand their services in the country since the sanctions were eased. Thursday’s announcement “is a very important first step, and a historic moment for Myanmar,” he said.
The company’s license agreement is with Myanmar’s Co-Operative Bank Ltd., known as CB Bank. The private bank, set up in 1992, is the first of several banks MasterCard will be teaming with in the coming months, Mr. Bindra said, without naming the other banks.
Mr. Bindra didn’t elaborate on how long the process would take and when ATMs operated by CB Bank would be prepared to accept cards issued by foreign banks, though he noted that in other nascent markets, including Bangladesh and countries in Africa, the process takes anywhere from 3 to 12 months.
MasterCard’s announcement follows an earlier move by Visa Inc., V +0.65% which said in August that it had begun training and preparing local banks to use electronic payment systems, including issuing credit-card facilities.
Financial services institutions like Visa and MasterCard could reap some of the biggest benefits from Myanmar’s emergence, particularly if foreign arrivals continue to increase.
According to statistics from the Myanmar government, international air arrivals jumped 63% between 2009 and 2010, and a further 32% between 2010 and 2011. Business and investment conferences are held in both Yangon and the political capital of Naypyitaw almost weekly.
One issue for foreign banks has been the challenge of finding local banks to partner with, given that some Myanmar financial institutions have been linked to the former regime or have staff still targeted by U.S. sanctions. CB Bank, Myanmar’s second-largest by deposits, has been among the most aggressive in seeking out partnerships with foreign firms as it tries to expand its own footprint.
“It’s hard to imagine an American or European bank is going to be involved in a joint venture” in Myanmar despite all the recent changes there, said Sean Turnell, an expert on Myanmar’s financial sector at Australia’s Macquarie University.
At the same time, Central Bank Deputy Governor Maung Maung Win said in a recent interview that the government plans to let foreign banks in eventually, perhaps next year, but “we don’t want to get some kind of negative impacts” by letting them in too quickly.
—Alison Tudor contributed to this article.
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