Central bank aims to avoid Cambodia's dollar conundrum
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Foreign banks that receive licences to operate in Myanmar will be allowed to extend loans in the local currency as well as US dollars, to avoid dollarisation of the country's financial market, said Set Aung, deputy governor of the Central Bank of Myanmar
He noted that this decision was driven by the sour experience in Cambodia. Promoting dollar-denominated loans, Cambodia has seen the role of its own currency, the riel, diminished, he said.
Set Aung said the policy would be applied first with the first five to 10 foreign banks to receive licences. He said earlier that the licensing process is on schedule, with the new licenses to be issued within this month.
To operate in the country, each bank is required to bring in at least US$75 million in capital.
“As Cambodia depends heavily on the dollar, their local currency is becoming extinct. We don’t want such a situation happening in Myanmar. That’s why we are giving room for kyat-based financial services besides dollar-based services,” Set Aung explained.
A number of banks have submitted applications for the new banking licenses including ICBC from China, ANZ from Australia, State Bank of India, Japan's Sumitomo Bank, Malaysia's Maybank, Thailand's Bangkok Bank, Singapore-based OCBC, South Korea-based Kookmin Bank, Taiwan-based Cathay United Bank, and Vietnam's BITV Bank.
