Banking Sector in Burma - Case Study Example

During The Colonial Years Role of exchange banks The banks which were in operational during the colonial period were concerned with trading with rice which was the staple food in the region. These banks did not create other branches as they concentrated within a confined region. Any bank that attempted to expand its operation territories did not survive because of misery and external invasion from Japanese. Most of the commercial banks therefore majorly dwelt with financing the trading activities and funding of the government projects (Rohmetra, 2009). They funded these activities from monies from customer deposits, offshore money and revenue from the professionals and managers from the European countries. However, some of the banks were able to maneuver through to the country’s offshore which was a channel to the external financial sourcing. Banking sector in Burma was self liquidating with the core instrument of carrying out the bill of exchange. This permitted an exporter to earn his/her proceeds immediately without any delay any time sales are done. The commercial banks did provide finance for this service of the bill of exchange. Furthermore, this service of the bill of exchange provided by commercial banks did not last for a long period. In contrary, some upcoming opponents tried to avoid as much as possible the long term advances. This was seen in continental Europe, Britain and some parts of United States of America. During the colonial period in Burma, the issue of long term lending demanded collateral which was of good quality as opposed to the banks that lent with attached security. On the other hand, exchange banks from Britain had an upper hand in the world economy. This was because it was at the centre of major trading economy. British banks One of the formal operational banks in Burma was the Imperial bank. This bank diversified its operations apart from the provision of financial services and funding to a number of other businesses within the region (Ray, 2008). This made it be the best foreign exchange bank in financial diversification. This made this bank be renowned exchange bank of India. Among the most well known names given to the exchange banks of Britain were the chartered bank of India, china as well as Australia. Up to date, they are the major worldwide financial organizations. Chartered bank was the most well known exchange bank in sourcing the agricultural sector in Burma. This was because it financed milling and storage of rice and carrying out market research of agricultural products like groundnuts. Non British banks One of the banks that existed was the National city bank New York, Citibank. Its operation was more or less like those of Britain. It was one of the conventional lenders in the region and majorly dwelt with letters of credit. Yokohama Specie was another non-British bank whose function was to gather specie especially in coins anywhere in the world. Among other banks that arrived during the war were the Chinese banks whose aim was to look for opportunities after the completion of the road network. Conclusively, towards the end of the colonial period, Central bank of India (CBI) had been founded. The primary function of the bank was to trade on telegraphic transfer to reduce the time taken for transacting the business. Another bank was the Indian bank which played a key role in movement of self sufficiency. Burmese banks of the colonial period. Dawn’s bank and U Rai Gyaw Thoo Company existed during the colonial period. Dawn’s bank was restricted to the rescue the farming property that had been credited to Chettiars. The bank did this by reducing the interest rates and settling the debts so as to reclaim back the soil. This principle was opposite to the chettiar’s expectation. On the other hand, the bank undue borrowing but rather put emphasis on saving. This gave strength to the bank. The bank’s driving motto was to establish proximity branches to the cultivator to inspire him/her to go to the bank and avoid going to the town where interest rates are relatively high (Rohmetra, 2009). Another virtue was to a platform of the staff to foresee that the money lent is used for the intended use. This was to benefit the employee. The bank therefore operated on both short and long term lending. The long term aimed at rescuing of the land, buying of new lands and improving the farm premises. Dawn’s bank also loaned to trusted traders and industries at a reasonable security with few legal legalities. The bank’s interest rates were 18% of the sum amounted and 82% for the fixed term. It offered lower interest rates than Chettiars and even as compared with other lending institutions. U Rai Gyaw Thoo Company was also one of the Burmese owned banks whose main was to give advances on land and gold deposits. It is also worth noting that there were few formal banks. This was because of cultural factors and pluralism in the society. The nonexistence of formal banks was due other conventional practices of how to save and borrow. This poor habit discouraged most people from formalizing the banking service e.g. no possibility of Burmese women to stop the use of jewellery. The Parliamentary Democracy years After the independence, Burma’s government took over in pursuing the overall economic development of the country. During the pre-colonial period, commotion had snatched the government the capacity to execute its concrete arrangements for economic development. Village banks These banks were on the forefront though they were managed in the village level. Each of these banks was managed by a committee headed by a headman. Their main function was to foresee the management of lending by ensuring that all the due procedures were followed. Interestingly, these banks were democratic though they operated on philosophical statutes that teamwork was a means to social wellbeing (Mukerjee, 2007). Furthermore, Village banks were also planned to take deposits and provide short term loans only at a relatively lower rates of about 12%. Cooperatives also depended on the infinite charge if its customers for the liabilities that may be incurred. The loan granted to the borrower guaranteed them up to the value of their land and even the entire of their property. Cooperatives The most crucial financial organization created under the parliament egalitarianism was the SAB. During the pre-colonial era, these organizations were a principal form of association within the globe of economy. They were meant to over credit facilities at a relatively lower rate. Chettiars. This financial body never featured out significantly before. They were not eager to come back to Burma after the war. Dawn’ bank was also influenced by the after-war legislation. Earlier, the bank had changed into a large and adored organization. Cumulative loans were safeguarded in form of cherished stones and gold. In addition to the formal monetary organizations, other enterprises also took part in lending activities with the most outstanding enterprise being the State Agricultural Marketing Board (SAMB). Other corporations were also established with each one of them receiving government financial support. Performance during the parliamentary democracy period With the scarcity of formal lending organizations, farmers were forced into fate of moneylenders who charged exceedingly high interest rates of about 250% per annum. Apart from this, there were other charges. The ultimate cause of this was the negligence of agricultural issues during the parliamentary democracy period. Commercial banking Burma’s main goals after the independence were the need for a well established monetary structure that could promote industrial development and a transformed system. During the parliamentary era, state of commercial banks also changed. They diversified their range of activities e.g supporting the establishment of new fruitful performances, willingness to receive deposits among other duties (Louis E. Boone, 2012). On the other hand, foreign banks gave their support thus saving Burmese from pressure. The private commercial banks, on contrary declined during this period. In a range of places, there was hostility to foreign banks by the government. This was because these banks had depended on the steadiness and potency of the sterling which could fluctuate without notice. The years of military rule The effect of aftermath was profound and destructive to the financial status of Burma. The banks were agglomerated and nationalized. The private banks were looked down upon by the government (Rohmetra, 2009). This resulted to nationalization. This also led to revelation of the government’s perception on the economy. Previously, the government borrowed money from Union banks by the sale of bonds and treasury bills. Inflations cropped into the economy thus bringing the whole economy down. During nationalization, the shareholders were given an assurance of compensation and before long, military officers were dispensed to banks’ managers. The nationalization of Burma’s banks brought wrinkles with the outside communities. Other formal regulations were formulated to limit banks operations (Louis E. Boone, 2012). These included the interest rates t be imposed on deposits and loans. The nationalization also steered other developmental project to marginalize the banking sector. Economy of the whole country declined e.g. bank deposits fell by a fraction of 0.2%. The decline in the lending rate could be experienced across various sectors of economy. In the revival of the nationalization of the banking sector, the rule of RC had gone on board. Decisions made by other authorities greatly damaged the Burmese agricultural sector. The low rates of payment turned down the village banking as it discouraged saving anymore. Money lenders The policy of Private money lending was banned. However, it persisted and yielded fruits due to low purchasing prices reduction of monetary organizations. Moneylenders had diverse interest rates. Reference List Louis E. Boone, D.L.K., 2012. Contemporary Marketing. p.303. Mukerjee, R., 2007. Economic Problems of Modern India: Problems of Development. Allied Publishers. Ray, P., 2008. Commercial Banks And Monetary Policy In India. New Delhi: Academic Foundation. pp.234-40. Rohmetra, N., 2009. Human resource development in commercial banks in India. Ashgate. Read More