Myanmar’s cash-based economy, which has proven to be frustrating for foreign travelers who depend on credit cards, could take a step toward global financial integration now that at least one domestic bank is hoping to get approval to issue credit cards inside the country by year-end, the Wall Street Journal said Wednesday.
Cooperative Bank Ltd., a private bank in Myanmar, known as CB Bank, that was the first to use an automated teller machine in the country, said that it wants to introduce credit cards for Myanmar citizens, allowing the bank’s customers to carry credit cards from Visa Inc. (NYSE:V) and Mastercard Inc. (NYSE:MA) for both domestic and international transactions.
“Our systems are all ready,” said Oo Thein Myint, the bank’s compliance officer and deputy general manager, speaking on the sidelines of a two-day banking conference aimed at charting out solutions to Myanmar’s backward financial sector.
No local bank is permitted to issue credit cards under regulations from the Central Bank of Myanmar. Central Bank executives are talking with regulators and hope to gain approval for the issuance of credit cards in the next few months.
Credit limits will be decided by the central bank but could be as much as five times an individual’s current salary, Myint said.
Less than 10 percent of Myanmar’s roughly 60 million population have bank accounts, analysts estimated, which could make calculating a potential customer's credit worthiness a hindrance. Further, the population is still distrustful of a banking system that was once controlled by the military junta. Most people carry cash even to pay rent or for other large transactions, WSJ reports.
For several months, the central bank and other private banks in Myanmar have been operating ATMs that can accept foreign-issued Visa and Mastercards, but many are distrustful of the machines. Owing to Myanmar’s poor infrastructure, the machines sometimes fail to connect to foreign banks and don't issue cash as anticipated -- sometimes, the machines even swallow the cards.
Credit cards for the locals could spur large card purchases from more than just tourists, by giving merchants across Myanmar a reason to install point-of-sale terminals, which are still rare across the country. Visa and Mastercard, both aiming for a piece of the up-and-coming economy, said that more than 500 restaurants, retailers and hotels will be able to accept their cards by the end of the year.
Meanwhile, the Central Bank of Myanmar is working with Visa to make prepaid debit cards available by year-end, which the companies hope might help the country’s people, including its small business owners and farmers, start chipping away at their reliance on cash, the Wall Street Journal reports.