Interview: U Kyaw Kyaw Maung

When will the credit rating bureau be established, and how will it strengthen Myanmar’s financial sector and consumer discipline?

U KYAW KYAW MAUNG: Section 75 of the CBM Law, enacted in 2013, established the Credit Bureau and the credit referencing system (CRS) in Myanmar. With the assistance of the International Finance Corporation, regulations for the CRS are being drafted and are set to be issued in FY 2015/16. Based on the regulatory framework and the establishment of the credit bureau, credit reporting service providers will make information related to the economic and financial obligations of a customer, including guarantees, payment history and publicly available information on credit decisions, available to financial supervisory authorities. This information assists in supervision and improves the soundness of Myanmar’s financial system. To strengthen consumer discipline, consumer rights and consumer rights procedures are proposed in the regulations of the CRS. The Myanmar Banks Association and NSP Holdings of Singapore have signed a memorandum of understanding to set up a credit bureau, which will be the first such institution in the country. Credit bureaux will enable lenders to access borrowers’ credit histories and benefit consumers and small and medium-sized enterprises (SMEs) by making financing more available. They will also strengthen financial stability throughout the country by reducing instances of multiple borrowing and by limiting over-indebtedness. The scheme will hopefully allow banks to offer more loans, which will extend coverage for set-up capital for local industry. Establishing a credit bureau is essential for the banks to operate autonomously. As the economy grows, the size of projects in various sectors are also growing at unprecedented rates. The CBM aims to facilitate the growth of new large-scale investments that are vital for sustainable economic development.

How will sharing credit information improve consumer and SME lending?

MAUNG: Governments around the world have formed credit bureaux to review the backgrounds of small enterprises. The establishment of a credit bureau will improve the ability to measure financial capabilities of SME and will encourage companies to keep more consistent records of their transactions. In the regulations for the CRS, consumer rights and procedures are described. Also, the CRS extends its credit information to all participants and stakeholders. This information may affect SME lending and the credit decision making of financial supervisory authorities.

One of the biggest problems limiting the ability of SMEs around the world to obtain adequate external financing for productive activities is information asymmetry. Creditors assess the creditworthiness of credit or loan applicants based on two criteria: their financial capacity to repay a loan, and their willingness to repay the loan. Credit reporting is extremely valuable to creditors in making enhanced, fact-based credit risk assessments, and in this sense it is a tool to facilitate SMEs’ access to financing.

What measures is the CBM taking to further strengthen Myanmar’s banking infrastructure?

MAUNG: The CBM’s approach is to gradually build a sound and sustainable foundation for the banking sector. In the first phase, the CBM will focus on finalising the legal and regulatory framework for the banking system; introducing modern payment and settlement systems; strengthening the CMB’s capacity for supervision; and preparing for the establishment of other financial infrastructure. The second phase will involve deepening the banking sector by enabling a wider range of financial markets, instruments and services, and implementing the ASEAN banking integration framework.