Myanmar has been referred to as the last frontier in the Association of South-East Asian Nations (ASEAN). The McKinsey Global Institute predicted Myanmar’s economy will double in 10 years, and more than quadruple by 2030 to reach over $200bn. This is a positive indicator for Myanmar, as its banking sector has started to gain momentum. The sector has seen great interest due to the lack of exposure it had during the five decades the country’s economy was closed. There are now 29 local banks, of which four are state-owned and nine are semi state-owned. There are also nine foreign banks, and another four have received their licenses recently. The latest four are expected to commence operation before Q3 2016.
Myanmar has a population of 53 million people, of whom fewer than 10 percent have bank accounts, which offers great potential for the sector. At present, people are underserved in terms of banking facilities. While the branch network (totalling less than 1,500) has been expanded aggressively over the last three years, its outreach is still considered low, with less than two bank branches per 100,000 people. This represents the lowest outreach in the region. With a young population, of which more than 70 percent are between the ages of 16 and 55, Myanmar’s banking sector will likely to see a rapid upward trajectory.
Challenges and opportunities
Myanmar‘s new financial institutions law (MFIL), enacted in January, will strengthen the banking system, in line with international requirements. The framework traditionally adopted by central banks in monitoring banks’ health will likely see greater control and stringent policy changes. The law will require that banks adopt proper credit risk management policies, enhance asset liability management policies to enable longer-term lending, improve funding frameworks to support growth, and strengthen management capabilities. The MFIL will see banks arming themselves with innovative products and services, as well as enhancing customer service and deliveries. Banks that will be able to operate efficiently, effectively and deliver higher customer satisfaction will reap the opportunities ahead.
Another big issue on the agenda is the ASEAN Economic Community (AEC), due to be implemented within the next 12 months. The AEC will help create a more competitive landscape, as well as opportunities for banks seeking expansion in regional markets. But, even though Myanmar has opened its banking sector, foreign banks are prohibited from operating in the domestic retail space. Domestic banks must, therefore, be ready to face the new competitive landscape, as well as seize the opportunity to enter new markets within the AEC.
Myanmar has a population of 53 million people, of whom fewer than 10 percent have bank accounts, which offers great potential for
The first wave
Over the last five years, under the new democratic government, Myanmar has witnessed drastic political and economic reforms in an effort to adhere to transparent governance and sustainable development. KBZ Bank has been fortunate to take advantage of this trend. KBZ started its first-wave transformation journey in 2012. This will be implemented within the next five years.
Working towards this transformation, KBZ Bank has remodelled its business strategy to focus on four strategy pillars: capacity building; innovation and leveraging cutting-edge technology; business realignment; and strengthening governance and risk management functions.
Firstly, in light of banking sector expansion in terms of size, complexity and the entry of foreign players, KBZ Bank considers its people-centric initiative a cornerstone of its success and sustainability. Acquiring the right skillset, personal development and knowledge could be a game-changer. This initiative started in 2012 and has continued to inspire us to invest in and enhance our human resources capability. New recruitment from abroad, as well as domestic talent, is actively sought.
In 2013, a new human resources planning initiative was implemented to enhance productivity and operational efficiency. A comprehensive staff reward scheme and performance-related incentives were introduced. Staff welfare benefits were reviewed to ensure a positive culture. Investment in leadership programmes and talent management is a continuing process, and a ‘right fit’ approach was thus adopted to continually enhance effectiveness and productivity through hiring.
KBZ Bank was first among Myanmar banks to introduce an internship programme, delivered in association with the University of Yangon’s Institute of Economics, to provide final-year undergraduates an opportunity to pursue a career in the banking industry. This internship programme has been well received, and KBZ Bank is proud to be a leader in the industry for homegrown talent.
Secondly, customer satisfaction and service quality is vital for any service industry. The ability to meet and delight the customer is a key differentiator. KBZ Bank’s strategy for innovation and leveraging cutting-edge technology is based on delivering customer-centric services, operational excellence and innovation. KBZ Bank has invested substantially in state-of-the-art technology since 2012.
Arising from this, KBZ Bank has successfully streamlined and rationalised its processes, products and systems capability to create a simpler, smoother and more affordable experience for its clients and customers. KBZ Bank is in a commanding position to grow aggressively and successfully, and has launched numerous successful initiatives aimed at stimulating the creation of new products and businesses, promoting innovation and sustaining growth.
Myanmar economic value 2016
Predicted Myanmar economic value 2026
Predicted Myanmar economic value 2030
Thirdly, Myanmar is heading towards the adoption of international best practices, while simultaneously increasing competition. As seen in many emerging markets, the changing banking landscape puts great demand on domestic banks. KBZ Bank has realigned itself and is ready to face the challenges. The business realignment transformation initiated in 2014 is a continuous process that will shape the bank according to the changing environment.
Lastly, KBZ Bank’s paradigm shift from a family-orientated business to an institutionalised business has gained the bank international recognition and acknowledgement. KBZ Bank’s clear understanding of strengthening corporate governance and risk management capabilities is a key contributor to its performance. This builds confidence for all stakeholders, chiefly regulators, customers, business partners, employees and shareholders. Presently, Myanmar companies are not fully in compliance with International Financial Reporting Standards (IFRS). To prepare itself for international recognition, KBZ initiated its journey towards IFRS compliance in 2015. KBZ recognises the importance of IFRS compliance, given the need to position itself for international engagement. The bank has targeted the financial year 2017/18 to be in full IFRS compliance.
Besides this, KBZ is also reviewing its reporting capability in budgeting and control, statistical and data monitoring tools, performance measurement and risk portfolio management processes. This strategic initiative pillar will enhance KBZ Bank’s position in terms of engaging with international investors, collaborating with global companies and facilitating overseas expansion. With the first-wave transformation journey in place, KBZ Bank is now ideally positioned to adapt effectively to changes in both the regional and the national market. KBZ Bank clearly understands the market, is ready to meet and anticipate customer needs, and is capable of delivering services in a manner that results in the highest customer satisfaction. This careful approach has so far seen KBZ Bank command about 40 percent in terms of domestic market share, as well as a prominent brand presence throughout Myanmar.