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.
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.
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., 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.
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