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January 28, 2021

Myanmar Issues New Guidelines for Non-Banking Financial Institutions

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On January 26, 2021, the Central Bank of Myanmar (CBM) published Notification 1/2021 in relation to non-banking financial institutions (NBFIs). This notification, which took immediate effect and has far-reaching implications for NBFI operations in Myanmar, applies to NBFIs wishing to conduct finance company business, leasing business, or factoring business, which are defined in the Financial Institutions Law (2016) (FIL) as follows:

  • Finance company business is “business engaging primarily in financing the purchase of goods or services with funding other than deposits from the public.” Interest would be charged on such finance.
  • Leasing business is “the business of letting or sub-letting movable property on hire, regardless whether the letting is with or without an option to purchase the property.” An obvious example would be vehicle leasing.
  • Factoring business is “the business of financing accounts receivables.” This is when a business sells its accounts receivable at a discount.

The key provisions of the notification are summarized below.

NBFI Registration

To conduct any of the above businesses, an individual or company must apply for a registration certificate from the CBM by submitting the documents specified in the notification. The registration certificate may come with terms and conditions prescribed by the CBM on a case-by-case basis. It seems likely that these terms and conditions could include minimum capital requirements, but this remains to be seen.

Trading as an NBFI without a CBM certificate is punishable by two to five years imprisonment and a fine of MMK 500 million (approx. USD 375,000).

NBFI Certificate Revocation

The CBM has extensive powers to revoke the NBFI certificate in certain circumstances, including failure to comply with the terms and conditions of the registration certificate; conducting non-NBFI business; conducting business in a manner detrimental to the interests of consumers; failure to comply with anti-money laundering or counter terrorism laws and regulations; and so on.

Prohibition on Deposit Acceptance

The notification makes clear that, unlike a commercial bank, an NBFI may not accept a deposit, which is defined by the FIL as “a sum of money paid on terms under which it will be repaid or it is repayable, either wholly or in part, with any consideration in money or money’s worth and such repayment being either, on demand or at a time or in circumstances agreed by the person or an entity making the payment and the person receiving it.”

Foreign Ownership

Interestingly, the notification refers to changes in ownership from local to foreign control, or ceasing the status of a foreign company, which implies that 100% foreign-owned NBFIs will be permitted. From our discussions with the CBM it appears that foreign investment may be allowed on a case-by-case basis, but this has yet to be confirmed. If so, this would be an interesting new opportunity for foreign investors in the financial sector. Currently there are no foreign-owned NBFIs in Myanmar.

Further Provisions

Among other things, the notification continues to deal with interest rates that may be charged by an NBFI, fit and proper requirements for senior management, financial reporting to the CBM, and inspection by the CBM.

For more details on the CBM’s notification for NBFIs, or on any aspect of banking law in Myanmar, please contact Dr. Ross Taylor at [email protected] or +66 2056 5880.

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