Six private banks opened foreign exchange counters on October 1 in the first step of a plan that the government hopes will eventually discourage people from using the illegal hundi remittance network.
Closed for more than a decade, the Central Bank of Myanmar recently gave six private banks – Kanbawza Bank, Myanmar Oriental Bank, Myawady Bank, Inwa Bank, Myanma Industrial Development Bank Co-operatives Bank – permission to open exchange counters on October 1.
The counters will stock US dollars, euros, Singapore dollars and Foreign Exchange Certificates, with exchange rates updated twice a day, bank sources said last week.
A Central Bank of Myanmar official said the banks would also be allowed to offer foreign currency accounts later in October.
Deputy Minister for Finance and Revenue U Win Than said during a press conference in Nay Pyi Taw in mid-September that the government plans to cooperate with foreign banks to allow domestic private banks to offer dollar accounts.
“Our process will become wider if we expand dollar accounts beyond a couple of government banks,” U Win Than said.
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Myanmar Investment and Commercial Bank (MICB) and Myanmar Foreign Trade Bank (MFTB) are the only banks allowed to offer foreign currency accounts. Both have few foreign banking partners.
There are about five million Myanmar workers abroad and most of them use the hundi network to remit money, a Ministry of Commerce official said. He added that there while there are about 70,000 to 80,000 sailors working abroad, less than 100 used banks to remit payments back to their families.
“More money will flow into Myanmar through the banks” if private banks are allowed to open foreign currency account, he said.
“And we can offer guarantees that the black market cannot,” the official said.
U Nay Aye, vice chairman of the Central Bank in Nay Pyi Taw, said: “The main reason there is hundi influence in Myanmar is that there was no incentive for someone to transfer money in the normal way; nobody used the banks. But now the government is opening up and letting people import cars.
According to MPT’s official statistics as of July 2010, the country had over 400,000 Internet users (0.8% of the population) with the vast majority of the users hailing from the two largest cities, Yangon and Mandalay.
Myanmar is trying to expand its business ties with other South East Asian countries including Malaysia and Thailand. More inflows and outflows will create trading needs for FX derivates products.