Banking on Myanmar’s Future
By Kyaw Hsu Mon 18 February 2014
RANGOON — Kanbawza (KBZ) Bank has weathered some severe storms since it was established in 1994, but now stands as Myanmar’s largest privately owned financial institution, with an estimated 94 billion kyat (US$94 million) in capital. Its founder, Aung Ko Win, is a former teacher with close ties to now-retired Vice Snr-Gen Maung Aye, one of the top generals in the former ruling junta.
U Than Lwin, a former deputy governor of the Central Bank of Myanmar with 40 years of experience in the banking industry, joined KBZ Bank in 2004 as its vice-chairman (2). In this interview with The Irrawaddy’s Kyaw Hsu Mon, he discusses the bank’s recent history and the current state of banking in Myanmar.
Kanbawza Bank was established in Taunggyi, Shan State, nearly 20 years ago. How many branches does it have now?
We have a total of 134 branches across the country, as well as 40 smaller banking centers located near markets or shopping malls for the convenience of our customers.
And how much capital does the bank have?
Almost 100 billion kyat. In terms of both the number of branches and capital, KBZ Bank is the largest of 19 privately owned banks in Myanmar.
How did KBZ Bank manage to become the largest bank in the country?
Our chairman, U Aung Ko Win, used all of his money from his gems business to invest in a bank that people could trust. He has never been involved in any controversy, unlike some other businessmen. He has always kept a low profile, but he supported the government as much as he could.
What was the most difficult challenge you have faced?
The bank crisis of 2003 was the biggest challenge. Asia Wealth Bank, which was then the largest bank in Myanmar, collapsed because of uncontrollable rumors. I don’t want to blame one side or the other—the private or the government-run banks—but it wouldn’t have happened if people were able to invest their money in foreign stock markets. Instead, they deposited their money with “micro-finance groups” that offered almost double the interest of legitimate banks. These organizations were close to the former military government, but after operating normally for a year, they just shut down, triggering a crisis that took down several banks.
How did KBZ Bank avoid this fate?
At the time, we were much smaller than Asia Wealth Bank, so we were able to survive. After the crisis, we improved our operations and hired some of the staff from the banks that collapsed, enabling us to expand.
There have recently been calls from Myanmar business people for lower interest rates. What do you think about this?
Savers want high rates, but businesspeople want low rates. Any changes in interest rates should be introduced carefully, to avoid adversely affecting either side. It is the responsibility of the Central Bank to decide on this, but if I were to offer my advice, it would be to follow the example of foreign countries, which usually adjust interest rates by just a few basis points [fractions of a percent] each time.
Why do you think the Central Bank has been so slow to allow credit cards in Myanmar?
The Central Bank has been introducing fundamental changes, step by step. They have allowed ATM machines and debit cards, but they are reluctant to allow credit cards because there is still no credit bureau in this country. But I’ve heard that they’re now working on setting up a credit bureau.
Some people have criticized the Central Bank for not creating better infrastructure fast enough. In your opinion, what does Myanmar’s economy need most at this moment?
People shouldn’t compare Myanmar to Singapore or Thailand and criticize this country’s banking system. Our problems can’t be fixed overnight. What we need first of all are skilled workers. That’s why KBZ Bank is building its human resources, by training our staff and bringing in foreign experts. We also need better bank technology so we can launch new products. In other countries, even small banks can offer up to 60 products, but we still can’t do that.
Many changes are expected to take place in Myanmar after 2015. What needs to be done now to prepare for those changes?
Some peoplesay that foreign banks will be allowed to operate in Myanmar after 2015, so we have to work hard to prepare for that. We especially need to improve our services for foreign investors. Some foreign investors will come only for short-term gain, but others will be here for the long haul. Those investors will want to see a lot of new laws introduced—for example, an intellectual property law, a condominium law and a competitor law that supports both foreign and local businesses.
Are you confident that KBZ will be able to remain in its preeminent position?
We are doing our best to provide convenient banking services to our customers. We are looking out for our own long-term interests by putting our customers’ interests first.