Relex has locked in an agreement to fund a new financial institution in Myanmar, looking to become the largest one in Myanmar within the next 10 to 15 years. This offering is now on the Relex Capital platform.
Grumman Holdings is looking for funding for a 70 percent stake in its start-up financial services business, totaling $1.3 m USD. This funding is only for stage 1 of the project.
Myanmar has a largely cash-dependent economic system right now that has held back expansion due to the unwieldy nature of transactions.
“It costs the government money to print cash and produce coins and this amount is quite a lot. There are also other costs involving transporting the money to various banks across the country,” said U Zaw Lin Htut, CEO of Myanmar Payment Union (MPU).
Grumman Holdings seeks to disrupt this traditional system by combining traditional banking institutions with fintech, creating a comprehensive modern financial institution with the modern convenience of electronic banking.
The institution will feature easy deposits, mobile payments, and easy links to other bank and loyalty cards.
Grumman Holdings is about to open its first branch office in Yangon, and Relex staff recently visited their office prior to opening.
To maintain a balance between deposit and loan, the institution will benefit from service fees charged at financial institutions (book-to-book transfers) and trading (FOREX and Commodity) commission fees. Personal services are conducted over the counter (at a teller) and remote services shall be provided via platforms such as Electronic Key Cards, Electronic Trading Platform, Internet Portal, Mobile Phone App (software), and Electronic POS (Point of Sale).
Photo Caption: (above) Zayar Properties is currently bidding on a government-owned heritage property in the capital city’s business district to transform into a headquarters and main branch during Phase 2.
Grumman Holdings will not be registered as a bank but as a full financial services provider.
According to Melvyn Pun of Yoma Strategic Holdings, Burmese people lack trust in banks.
“Banks are bypassed,” he said to a panel on CNBC. In order for Myanmar to grow, the country would need to “expand on non-bank services” and “leapfrog the traditional methods.”
The move toward digitization began in 2012 when banks were first able to give customers ATM cards.
These cards were followed by a wave of electronic payments apps, like CB Pay, KBZ Pay, AGD Pay, and MAB Mobile bank. The mobile currency operators of Wave Money, M-Pitesan, TrueMoney and OK Dollar all also appeared within the last five or so years.
Despite these options, adoption has been incredibly slow in Myanmar, especially outside of Yangon. In order to help adoption, Grumman Holdings intends to integrate its financial services into a large scale mixed use development project.
And young locals are beginning to clamor for more modern solutions, as a new bus government bus initiative has commuters scraping up exact change in small coins or risk being left on the side of the road.
“If you don’t have any change, you’re going to have trouble riding the bus. It’s not convenient at all to have to ask for change from the next passenger who gets on. I want the card payment system which I’ve been hearing about for a quite a while to be quickly implemented,” said 26-year-old Ma Thidar Lwin, who commutes daily via public transport, according to Consult Myanmar.
Myanmar was under a strict military dictatorship from 1962 to 2011. Its recent elections have dissolved the military junta and opened up the country to the rest of the world. Located directly between China and India, Myanmar is strategically located among major financial global powers. Its GDP was 69.32 billion USD in 2017.
Strengths as registering as a financial service provider over a bank are:
The Project shall not be registered as a banking institution but a Financial Service Provider. Therefore, it is not bounded by Central Bank’s restrictions on either interest rates nor collateral regulations.
The Project can own assets (unlike any banking institutions in Myanmar) which can be used as a leverage to comfort investors and clients.
Because the Project can own assets, the Project can manage defaulting loans at better flexibility at our own risk management.
Being able to own assets, the Project can easily finance government projects with an ease of flexibility (unlike any banking institutions in Myanmar).
The largest bank in Myanmar has a paid-up capital of MMK 20B, and the Project can easily increase and expand its businesses to provide better assurance to customers (or clients).
The Project shall have bank accounts with the commercial banks in Myanmar so that it can easily have access to any of the bank branches nation-wide. The Project will access the largest financial network in Myanmar by utilizing all the bank branches together.
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