Australia: Foreign Bank Lending In Myanmar1

Last Updated: 13 September 2006
Article by Alec Christie

Currently, foreign bank activities in Myanmar are severely curtailed.2 Where the lender to a company incorporated or project located in Myanmar is a foreign bank, the following issues, among others, arise for consideration.3


The Financial Institutions Law 1990 provides that only "financial institutions" established in Myanmar and approved by the Central Bank in accordance with the terms of the Financial Institutions Law may carry out any of the following activities, among others, in Myanmar:4

(a) lending or advancing money, whether with or without security;

(b) accepting debentures and other documents of title and debt securities, whether negotiable or not;

(c) financing or assisting in financing any business undertaking through syndicates or otherwise;

(d) undertaking trust business and the administration of estates as executor or trustee;

(e) managing or disposing of properties which come into the possession of the institution in satisfaction of any of its claims; or

(f) undertaking other financial services.

In other words, only banks licensed by the Central Bank may undertake "banking business" in Myanmar. At present no foreign banks have been licensed to operate in Myanmar.5

The consequences for a foreign bank of undertaking any of the above listed activities without the approval of the Central Bank include:

(a) administrative and criminal penalties, including a fine of up to Kyats 50,000 or five years’ imprisonment or both for the legal entity and persons responsible for the violation;

(b) the probable unenforceability of the loan and any security over assets in Myanmar, on the basis of illegality;6 and

(c) the possible black listing of the foreign bank, preventing it from obtaining a licence when foreign banks are permitted to operate in Myanmar.


The Companies Act requires that:7

"No foreign company shall carry on…business in [Myanmar] unless it has obtained a permit in accordance with the provisions of the Companies Act".8

Any loan by a foreign bank to an individual in Myanmar or a Myanmar incorporated company is likely to be considered as "carrying on business" in Myanmar, requiring that the foreign bank obtain a Permit to Trade. However, a Permit to Trade is only available to a registered branch or locally incorporated subsidiary through which the Myanmar business is to be conducted (which brings into focus the current prohibition on foreign banks establishing more than a representative office/doing business in Myanmar).

Even if the foreign bank were only to hold security over Myanmar assets (the loan having been advanced to an off-shore parent company for example), the enforcement of the security, especially where the foreign bank is assigned or takes over the project until a buyer can be found, could also constitute the carrying on of business in Myanmar, in breach of the provisions of the Companies Act.

The consequences of a foreign company carrying on business in Myanmar without obtaining a Permit to Trade include criminal penalties for the company and responsible officers of fines of up to Kyats 500 or, for a continuing offence, Kyats 50 a day whilst the default continues.9


Despite widespread belief to the contrary, the Money Lenders Act 1945 remains in force in Myanmar.10 The Money Lenders Act applies to all "loans", whether made to individuals or companies in Myanmar and sets the maximum rates of interest recoverable through the Myanmar Courts at 12 per cent per annum for secured loans and 18 per cent per annum for unsecured loans.11 All agreements (and any provision in a contract) to pay compound interest are void12 and the total interest recoverable through the Myanmar Courts on a loan cannot exceed an amount equal to the original principal.13 In addition, the Court is given wide powers to re-open the transaction and, among other things, set aside, revise or alter any security given or agreement made in respect of any loan.14

A "loan" is defined as an advance, whether in money or in kind, at interest and includes "any transaction which is in substance a loan".15 There are a number of exceptions for named local banks and societies and a loan taken or advanced by the Government or by any local authority is specifically excluded from the operation of the Money Lenders Act. Also, loans advanced by a trader to another trader in the ordinary course of business and in accordance with trade usage are excluded from the definition of "loan".16


The Foreign Exchange Regulation Act 1947 ("the Regulation Act") prohibits all transactions in foreign exchange except those with authorised dealers or as expressly permitted by the Controller.17 This prohibition has been imposed with a view to ensuring that control over all foreign exchange dealings may be effectively exercised by the Controller/the Central Bank of Myanmar.18 Unless the previous general or special permission of the Controller has been obtained:19

(a) no person, other than an authorised dealer,20 may buy or borrow from, sell or lend to or exchange with any person, not being an authorised dealer, any foreign exchange; and

(b) no person resident in Myanmar, other than an authorised dealer, may buy or borrow from, or sell or lend to or exchange with any person, not being an authorised dealer, foreign exchange.


The Regulation Act’s prohibitions primarily relate to the actions of those "resident in Myanmar". Although not defined in the Regulation Act, it appears that the expressions "resident in Myanmar", "resident outside Myanmar" and "person resident in Myanmar", used throughout the Regulation Act, are used in the sense of technical residence at the time of the act complained of and not in the sense of physical residence. That is, "a person resident in Myanmar" simply means a person who has a permanent place of residence or business in Myanmar. In addition, for the purposes of the Regulation Act, any person resident in Myanmar at anytime after August 1, 1947 will be deemed to continue to be resident in Myanmar (even though they may have left Myanmar) until the Controller directs otherwise.21


In addition, the Regulation Act enacted the provisions of Sections 5,6 and 7 of the then English Exchange Control Act. Unless a general or special exemption is obtained from the Controller, no person resident in Myanmar shall:22

(a) make any payment (whether in Kyats, FEC or foreign currency) to or for the credit of any person resident outside Myanmar;

(b) draw, issue or negotiate any bill of exchange or promissory note or acknowledge any debt so that a right (whether actual or contingent) to receive a payment is created or transferred in favour of any person resident outside Myanmar. It should be noted that the making of any book entry or other statement recording a debit against a branch of any business in favour of the head office or any other branch of that business is treated as an acknowledgement of a debt whereby a right is created in favour of a person resident where the head office or other branch is situated;23

(c) make any payment to or for the credit of any person by order or on behalf of any person resident outside Myanmar. For example, if an agent in Myanmar makes a payment for or on behalf of a foreigner, he/she commits an offence under the Regulation Act;

(d) place any sum to the credit of any person resident outside Myanmar;

(e) make any payment to or for the credit of any person as consideration for or in association with the receipt by any person of a payment or the acquisition by any person of property outside Myanmar or create or transfer in favour of any person of a right (whether actual or contingent) to receive a payment or acquire the property outside Myanmar. In other words, this prohibits transfers of Kyats or FEC between persons in or resident in Myanmar against transfers of money or property outside Myanmar; or

(f) draw, issue or negotiate any bill of exchange or promissory note or transfer of any security or the acknowledgement of any debt by which a right (whether actual or contingent) to receive a payment is created or transferred in favour of any person as consideration for or in association with any matters referred to in (e). Thus, the transfer of a security between persons in or resident in Myanmar against transfers of money or property outside Myanmar is prohibited.


The Regulation Act also prohibits the export of securities to any place outside Myanmar without the general or special permission of the Controller. This prohibition includes a prohibition on the:24

(a) taking of any securities by a traveler or sending them to any place outside Myanmar;

(b) transfer of any security or any interest in a security to or in favour of a person resident outside Myanmar;

(c) transfer of any security from a Myanmar register to a foreign register;

(d) substitution for any security in or registered in Myanmar of any security either outside or registered outside Myanmar; and

(e) issue of any security registered in Myanmar to a person resident outside Myanmar.

The expression "security" is defined as meaning shares, stocks, bonds, debentures, debenture stock and Government securities other than currency notes, deposit receipts in respect of the deposit of securities and units or sub-units of unit trusts, but not including bills of exchange or promissory notes other than Government promissory notes.25

The Regulation Act also provides that in the case of a person who is a "nominee", the permission of the Controller must be obtained for any act whereby another person is substituted as the beneficial owner or any act whereby the original person giving instructions in respect of the disposition of the security is substituted by another person.26 For the purpose of the Regulation Act, a "nominee" is a person who is holding a security not in his/her own right but for somebody else who has the right to give instructions as to the exercise of the rights in respect of the security and the disposition of the security.27


The penalties for breaching or attempting to breach the provisions of the Regulation Act include imprisonment of up to three years, fines and possible confiscation of the relevant foreign exchange, currency, bullion, security or etc.28 Where a company commits the offence, every director, manager and secretary will be punishable, unless he/she can prove that such offence was committed without his/her knowledge.29


1. The information contained in this article should not be relied upon as professional advice and should not be regarded as a substitute for detailed advice in individual cases. No responsibility for any loss occasioned to any person acting or refraining from action as a result of material in this article is accepted by the author or by the company.

2. See discussion in Chapter 8 of A. Christie and S. Smith, Foreign Direct Investment In Myanmar, 1997, Sweet & Maxwell Asia.

3. See also, discussion in Chapters 4 and 9 of A. Christie and S. Smith Foreign Direct Investment In Myanmar, 1997, Sweet & Maxwell Asia regarding available security and see below under "Foreign Exchange Transactions" as to the impact of the foreign exchange regulation.

4. Sections 25, 26, 75 and 80 of the Financial Institutions Law.

5. See discussion in Chapter 8 of A. Christie and S. Smith, Foreign Direct Investment In Myanmar, 1997, Sweet and Maxwell Asia.

6. In regard to unenforceability due to "illegality", see discussion in Chapter 7 of A. Christie and S. Smith, Foreign Direct Investment In Myanmar, 1997, Sweet and Maxwell Asia.

7. For a fuller discussion of the application of the Companies Act, see A. Christie and S. Smith, Foreign Direct Investment In Myanmar, 1997, Sweet and Maxwell Asia.

8. Section 27A (1) of the Companies Act.

9. Section 27A (5) of the Companies Act.

10. Union of Myanmar, Attorney-General’s Office, Index of Myanmar Laws and Amendments, (April) 1998.

11. Section 10 (1) of the Money Lenders Act.

12. Section 11 (1) of the Money Lenders Act.

13. Section 12 of the Money Lenders Act and see Ma E Khin v. Ma Ahma Hpyu [1951] B.L.R. (S.C.) 248.

14. Section 13 of the Money Lenders Act.

15. Section 2 (5) of the Money Lenders Act.

16. Sections 2 (5)(f) and (g) of the Money Lenders Act.

17. Section 5 of the Foreign Exchange Regulation Act and P.B. Sen v. The Deputy Controller of Exchange [1951] B.L.R. (H.C.)476

18. P.B. Sen v. The Deputy Controller of Exchange [1951] B.L.R. (H.C.)476

19. Section 5 (1) of the Foreign Exchange Regulation Act. Note: the Controller is currently the Deputy Governor of the Central Bank.

20. Section 4 of the Foreign Exchange Regulation Act.

21. Section 21 (1) (a) of the Foreign Exchange Regulation Act.

22. Section 6 (1) of the Foreign Exchange Regulation Act.

23. Section 21 (e) of the Foreign Exchange Regulation Act.

24. Section 14 (1) of the Foreign Exchange Regulation Act.

25. Section 2 (f) of the Foreign Exchange Regulation Act.

26. Section 14 (2) of the Foreign Exchange Regulation Act.

27. Section 14 (5) (b) of the Foreign Exchange Regulation Act.

28. Sections 24 and 24A of the Foreign Exchange Regulation Act and see, Union of Myanmar v. Daw Cane Shan [1991] B.L.R.41.

29. Section 24 (2) of the Foreign Exchange Regulation Act.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

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