4. FINANCIAL LANDSCAPE 50 4.1 ACCESS TO FINANCIAL SERVICES IN MYANMAR A sound financial system is an essential pillar of every economy. The financial sector mobilizes savings and allocates credits to other sectors to promote economic growth. It provides not only payment services but also enables coping with economic uncertainties by hedging, pooling, sharing, and pricing risks (e.g. via insurances). An efficient financial sector hence reduces the cost and risk of producing and trading goods and services and thus makes an important contribution to raising the standard of living 1. The financial sector in Myanmar at present is small and highly underdeveloped. Access to financial services is severely limited, as reflected by the low outstanding loans-to-GDP ratio of 4.7 percent and deposits to- GDP ratio of 12.6 percent in 20112. Four state-owned banks (Myanmar Agriculture and Development Bank, Myanmar Economic Bank, Myanmar Foreign Trade Bank and Myanmar Investment and Commercial Bank) in addition to 19 private banks dominate the sector. In order to prepare domestic banks for competition, work is underway to revise outdated banking laws ahead of Myanmar’s integration with ASEAN in 20153. In anticipation of the above mentioned development, 17 foreign banks, including United Overseas Bank, First Overseas Bank and National Bank have established local representative offices in the country. There is only one state-owned insurance company (Myanmar Insurance) in Myanmar which is also small in scale and outreach and offers no insurance for any form of agricultural sector activities, such as flood, crop, or livestock. For the first time in more than 50 years, private insurance companies have been given conditional approval by Myanmar Insurance and the Insurance Business Supervisory Board (IBSB) to begin operations4. 1 Foerch, Thomas, Thein, San and Waldschmidt, Sophie. (2013). Myanmar’s Financial Sector: A Challenging Environment for Banks. Downloaded from the website http://www.giz.de/en/downloads/giz2013-en-financial-sector-myanmar.pdf KBZ bank 2 Seward, James. (2012). Myanmar Access to Finance. Washington, D.C.: World Bank. 3 McNulty, Lucy. (2012). Myanmar Banking Sector Urges Foreign Investors to Wait.International Financial Law Review. Downloaded from the website http://www.iflr.com/Article/3009520/Myanmar-banking-sectorurges-foreign-investorsto-wait.html 4 Myanmar Times. (2012). Private Insurance Companies Given a Go Ahead.