ABSTRACT

The peculiar history of Myanmar’s financial sector is not glamorous. Having held the top position in the region in the 1950s, the sector has experienced nationalization, multiple financial crises, including three demonetizations, in 1964, 1985, and 1987, as well as a severe banking crisis in 2003. As a result, banking in Myanmar remains at an infant stage with little public trust in the Myanmar kyat as a currency of value and little faith in the soundness of the formal banking sector (True 2015, 1). The financial sector of Myanmar can far too often be found at the bottom end of most rankings, performing poorly in both regional and international comparisons. Examples of this unsatisfactory performance are the ratio of credit to the economy (a widely used metric for the development of a financial sector) of about 12% – of all Asian countries only Afghanistan has a lower ratio and hence a less developed financial sector – or a mere 5% share of the population with a bank account. Up until today, Myanmar predominantly remains a cash economy. The fundamental weakness and underdeveloped state of the financial sector threaten to undermine the existing reform processes (Skidmore and Wilson 2012, 16). Currently, the financial sector cannot adequately take over its role as financial intermediary, failing to support and facilitate the growth of the real economy.