Myanmar (CNN) -- When Nyein Chan Aung sold his house
in Yangon recently he faced a dilemma -- what do to with the proceeds.
Did he he take his cash to the bank or keep it at home?
He compromised. A third
went to the bank, the rest stayed where he lives. In fact, the only
reason he deposited anything at all was fear of a house fire.
This is banking in Myanmar, circa 2013. An outdated and debased system,
open for decades to abuse by the previous regime, and shunned by about
90% of the population.
People here completely
bypass the banks and keep their money at home. It's the closest thing
you'll find to a total cash economy anywhere in the world.
The Myanmar government
has made fixing the banking system a priority but a quick visit to any
branch reveals the size of the problem they face.
It's an extraordinary
scene: Teller counters and the office tables are literally overflowing
with cash. Bricks of the stuff, tied in bundles of a thousand notes
balancing precariously on top of each other or littering the floor in
large untidy piles. And customers bring in more in bulging shopping
bags, while security guards wheel in white rice bags with still more
bundles of kyat, as the local currency is known.
Myanmar is still working
on a real credit system and ATM machines are a relatively new
development -- if they work. Like most businesses in the city and the
towns, frequent blackouts means the systems shut down. I tried three
ATMs over the course of a day. None worked.
But it goes much deeper
than that. The banking system we take for granted in most countries --
easy loans, financial products, interbank operations, credit -- they're
all virtually non existent here. There is no proper corporate banking.
Businesses cannot get loan repayment plans of longer than one year.
True, they are rolled over but it means the central plank for corporate
borrowing -- a realistic repayment schedule -- doesn't exist.
Bank managers still have
to telephone the central bank at the end of each trading day to tell
them what the balance in the books is.
There is now a banking
law before parliament and until that is approved, thorough
root-and-branch reform cannot take place. And even when it does, the
banks have to overcome enormous mistrust in the system, built up over
two generations of mis-management. People here highly suspicious of
banks.
One clear sign of change
is that credit cards are becoming more common, but only by Visa and
Mastercard. No local issuer yet. Visa plans to issue pre-paid credit
cards by the end of this year.
It's a small step, but
for Myanmar a small step in the right direction is critical as it gets
ready to be part of a global integrated financial system.
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