Financial Sector Development

Project description

Title: Banking and Financial System Development
Commissioned by: German Federal Ministry for Economic Cooperation and Development
Country: Myanmar
Lead executing agency: Ministry of Planning and Economic Development
Overall term: 2012 to 2016 

Myanmar. Die schnellen Veränderungen im Bankensektor sind in den lokalen Medien ein wichtiges Thema. (Foto Veronika Wijaya) © GIZ

Context
Since Myanmar began to open up in 2011, the country has been reforming its economic policies with the aim of establishing a market-oriented economy. Sworn in in March 2016, the new government with Aung San Suu Kyi and President Htin Kyaw is expected to persist with and intensify these structural changes. Small and medium-sized enterprises (SMEs) play a central role in sustainable economic development. In Myanmar, SMEs comprise the great majority of private companies, and are extremely important for the labour market.

The lack of access to adequate financial services is one of the main obstacles to the growth of SMEs. The financial sector as a whole is in urgent need of development and is ill-adapted to meet the needs of SMEs. Sustainable financial services that cater to such enterprises do not exist. This is largely because of the restrictive regulations applied to the banking sector, as well as the institutional and technical shortcomings of the commercial banks.

Objective
The formal banking sector offers sustainable and demand-oriented credits to small and medium-sized enterprises.

Approach
The project supports local partner institutions at different levels of the financial sector. This includes advisory services to the Central Bank of Myanmar on creating a supportive legal framework, support for training providers for the banking sector, and cooperation with individual banks to pilot the provision of financial services for SMEs.

Results
The project supported the revision of the banking law. At the beginning of 2016, the law was passed by the Parliament. It lays the foundation for a gradual liberalisation of the banking sector, thereby fostering comprehensive and sustainable services for SMEs.

The SME credit portfolio of the partner banks of the project has tripled. At present, more than 12,000 SMEs, almost half of them located in rural areas, have access to credit. Moreover, the project supports partners such as the Myanmar Banks Association and the Yangon University of Economics with comprehensive training activities for human resource development. By February 2016, more than 11,000 participant training days had been delivered.

The Myanmar Banks Association regularly offers a certificate level course in SME financing. A number of financial institutions have submitted their own proposals to the project to receive support, in which cases they cover substantial parts of the resulting costs themselves. Thereafter, they make their positive experiences and their know-how available for the benefit of the whole sector. The Yangon University of Economics is currently revising its masters degree in banking, and is taking advice on this from the project.

With assistance and advice from the project, the Banking Sector Financial Reporting Standards Implementation Committee (BFRIC) took up its work in January 2016. The purpose of the committee is to support the banks in implementing international financial reporting standards.

Myanmar. Diese Leiterin einer lokalen Nähfabrik (Mitte) ist eine der ersten Kundinnen eines speziellen KMU-Kredites, den eine der Partnerbanken (Mitarbeiterinnen rechts und links) des Projektes eingeführt hat. © GIZ Foto: GIZ/Vanessa Petzold