Mobile banking in Myanmar: Leapfrog spotting FOR a foreigner at least, it is still a bit of a thrill to use an ATM machine in downtown Yangon. After years of carting around wads of dog-eared dollars to exchange for even larger wads of ancient, crumbling kyat, the local currency, immaculate new machines now disgorge crisp new banknotes. It is a minor miracle. Linked to the international payment system only late last year, hundreds of ATMs around the country can now be used on Visa's payments system. The cash machines are a mark of real progress. During decades of brutal and isolating military rule, financial services suffered as much as any other sector. All foreign banks were kicked out of the country in the mid-1960s; from the mid-1990s onwards, American sanctions in particular cut the country off from most forms of international financial transactions. The domestic financial system withered away, too. Less than 10% of Burmese are thought to have a bank account. Building financial services virtually from scratch takes time. Microfinance institutions have recently started operating in Myanmar. About 30 foreign banks have opened representative offices to establish a presence and research the market. But until a new finance law defines their roles and the extent to which they must partner with local firms, they cannot do much more. What could really transform things is a nationwide mobile-phone service. Mobile banking should be ideally suited to Myanmar. Even if banks were prepared to invest heavily in building physical branches, the country's large (about 60m) and mainly rural population is spread out. "Done right," says the Consultative Group to Assist the Poor, a pressure-group for financial inclusion based at the World Bank, "mobile banking has the potential to help Myanmar provide basic formal accounts and payment services to most of its citizens," thus "leapfrogging" conventional banking altogether. To achieve that Myanmar will need an excellent new mobile-phone system. Another legacy of the country's years of isolation is that relatively few people have ever used mobile phones. Most could not afford artificially inflated prices for SIM cards; in any case a poor infrastructure means that coverage is patchy. The responsibility for changing that rests largely with the two foreign firms that won an auction for mobile licences in June: Norway's Telenor and Qatar's Ooredoo (formerly Qtel). They will compete against each other and a local state-owned outfit as well. New SIM cards will cost just $1.50, compared with $200 or more in the past. Telenor and Ooredoo are lesser-known names in the telecoms firmament, but both have wide experience in poor countries and in Asia. They have ambitious targets to build thousands of masts to cover about 85% of the country within five years. Ooredoo promises to pump $15 billion into Myanmar. Both have also committed themselves to delivering financial (and other) services through their networks. Telenor already does this in a limited way in Pakistan and Bangladesh. Another prerequisite for a viable, accessible mobile-phone banking system is the establishment of a good agent network to process client transactions such as depositing or withdrawing money. Telenor promises to have 70,000 sales locations for its phone cards as well as 95,000 refill points. The number of "financial" sales points, where customers can put credit on their phones for cash, would be lower, says Petter Furberg, the head of Telenor in Myanmar, but still enough to provide mobile banking in most of the country. A final factor is whether the government in Yangon will rein in its deep-rooted instincts to control banking and the wider economy. Rather than specifying individual banks to lead the build-up of mobile banking, Mr Furberg says the ideal approach would be for the government to stick to drawing up robust regulations and then to open the market to "as many players as possible." Either way, the secret to changing Myanmar's financial sector may well lie with the phone.