Author: Myanmar Business Today | 24 Apr 2017
The government must relax rules governing interest rates to allow banks to benefit from interest rate spreads by offering new financial products, a roundtable of industry leaders has said.
Under current rules, all loans must pay 13 percent interest regardless of their classification and all deposits must pay 8 percent, Azeem Azimuddin, the CFO of Aya Bank, said.
“This means there is no incentive for banks to diversify products as there is no financial benefit,” he said as part of a roundtable discussion on the potential for new financial services in Myanmar, which was organised by the Oxford Business Group.
The rules setting interest rates are designed to ensure borrowers and savers get a fair deal and to prevent exploitation by lenders, but critics say they are too rigid and stifle innovation in the sector.
Azimuddin said that concerns that deregulating interest rates would be bad for pensions and other saving schemes were “overstated”.
“Countries around the world have developed schemes that protect specific pensions and savings,” he said.
Kim Chawsu, managing partner of the Katalysts Investmment Group, said: “We need to get to the point where a bank is free to structure the interest rate at a level that creates an appetite for the bank to lend,” she said.
The roundtable also discussed the potential for a functioning mortgage market to develop in Myanmar.
Hal Bosher, CEO of Yoma Bank, said Myanmar was a long way off achieving that.
“I believe expectations need to be managed,” he said.
“I do not think banks are well positioned (to provide mortgages)… all the bank’s credit books are backed by land and buildings. In other words the banks are already large buyers of land,” he added. “(They) have huge levels of property exposure already.”
Banks also lacked the processing systems required to handle large volumes of low value mortgages, he said.
MBT Reporter
Ref: http://www.mmbiztoday.com/articles/banking-leaders-call-deregulation-interest-rates