State banks shares eyed
Amid restructuring Myanmar Agricultural Development Bank, the government is investigating share sales in several state-owned lenders as a way to raise their capital.
THE government expects to have a restructuring plan for the struggling Myanmar Agricultural Development Bank (MADB) drawn up by the middle of next year, and is investigating the possibility of issuing shares in other state-owned lenders to the general public, a senior official at the Ministry of Finance and Planning told The Myanmar Times.
MADB is being placed under finance ministry control as part of a plan to corporatise the bank, which the agricultural industry and some MPs say is failing in its mandate to provide adequate financing to the country’s farmers. The lender struggles to stay profitable and relies on loans from state-owned enterprise Myanmar Economic Bank (MEB), while coming under fire from parliament for lending too little money, too late.
A government committee tasked with carrying out a fourmonth corporatisation feasibility study starts work this month, deputy planning and finance minister U Maung Maung Win told The Myanmar Times. That study will be followed by another four-month period during which the committee will draw up a formal restructuring plan, he added.
MADB is the first bank to be tackled as part of the government’s review of state-owned enterprises. But the authorities are also looking into how to reform the other state-owned lenders – MEB, Myanmar Investment and Commercial Bank (MICB) and Myanmar Foreign Trade Bank (MFTB), U Maung Maung Win said. The World Bank is helping the government with a financial sector development plan that includes all the state banks, the deputy minister added.
A report from German international cooperation agency GIZ last year said the state-owned banks faced several issues, particularly around information technology, policy framework and capitalisation. MEB, the largest of the state-owned banks, provides subsidised loans to other banks to help serve specific target groups, and had not made a profit since 1990, according to the GIZ report.
MEB, MICB and MFTB will remain state-owned and “not be fully corporatised”, said U Maung Maung Win. But in order to help them raise more capital the government is considering how it might sell shares in the three lenders, he added.
Further down the line, the state banks could consider listing on the Yangon Stock Exchange. “But first we have to consider the management and functions of these banks,” said U Maung Maung Win. Some services the banks currently provide will be altered, and others improved and extended, he said.
In a report on Myanmar’s banking sector published in September, strategy and consultancy firm Roland Berger said, “State-owned banks are still operating under their initial mandates, putting them in direct competition with private banks.” Until 2011, only state-owned banks could offer foreign currency services and accounts, and they still have a disproportionate share of that market.
The government has made efforts this year to level the playing field between the state-owned and commercial banks, promising to enforce the same rules on capital and foreign exchange holdings across the two groups, and ending state banks’ monopoly on providing foreign currency accounts to state owned lenders.
State banks’ share of total banking assets has fallen from 67 percent in March 2013 to 46pc in March this year, but state lenders still have too large a share of the banking market, the Roland Berger report said.
Their commercial banking operations should be wound down, or at least forced to compete on a level playing field, the report said. Roland Berger also recommended considering mergers among the state-owned banks, something the IMF and the World Bank have raised in the past.
People walk past the head offices of Myanmar Agricultural Development Bank in downtown Yangon .