Myanmar's struggling banks stall growth of car sales

Consumers and businesses find it hard to access credit amidst gaps in the financial system.

The underdeveloped banking system of Myanmar remains the biggest barrier to greater vehicle ownership in the country as consumers and businesses find it hard to access credit, Fitch Solutions reported.

Access to basic financial services in Myanmar remains very limited, which Fitch measured according to the number of commercial bank branches as well as the number of adults with bank accounts. Rural areas remain untapped with only 6% of commercial bank loans going to the rural sector.

Fitch Solutions said the current banking situation equates to consumers and small and medium-sized enterprises (SMEs) will struggle to buy a vehicle or secure a business loan, which in turn will severely limit the size of the consumer base with the ability to own a vehicle.

Furthermore, the prevalence of state-owned banks meant that many state-owned enterprises in other sectors of the economy receive preferential access to financing. This limits credit availability and distorts the playing field for foreign and private companies.

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“Combined with the continued presence of regulations limiting the activities of foreign banks, this also stifles competition in the banking sector and the provision of financial products at market rates. This means that the majority of the vehicle demand will be controlled by the government which will struggle to sustain growth in Myanmar automotive sector without a supporting private sector,” the report added.