Edwin Vanderbruggen of VDB Loi in Myanmar discusses the new mobile financial service license
On March 30 2016, the Central Bank of Myanmar (CBM) issued regulations on mobile financial services (“the Regulations”), which the marketplace has long been awaiting. Below we have set out the key points to consider if you wish to apply for permission to provide mobile financial services (MFS License) in Myanmar.
Who can apply?
Of significance, it appears that only mobile network operators and registered “non-bank” financial institutions are entitled to apply for an MFS License. The applicant must be incorporated solely for the purpose of providing mobile financial services, and must have a minimum capital of MMK3 billion (approx. $2.5 million at the time of writing), amongst other requirements, and must submit an application to the CBM, which according to the Regulations, should be processed in 90 days.
What should be included in the application?
The application must include a fee of MMK3 million (approx. $2,500 at the time of writing), technical/functional details of the mobile financial services to be provided, a three-year business plan, details of the board of directors and senior managers, and if the applicant is a mobile service operator, then a non-objection letter from what was previously the Ministry of Information and Communications Technology (now the Ministry of Transport and Communications). The CBM may request further information, and notably, in theory may prescribe a range of fees and charges to avoid anti-competitive behavior.
The CBM has not yet circulated a template for the MFS License application, and it can be expected that additional information and documents will be required, including with regard to agent networks, systems and technology, consumer protection measures, and trust account issues (see below for more details).
A mobile financial services provider is allowed to operate through a network of agents (agent exclusivity is not permitted), subject to CBM approval of the agent network based on three-year projections, which include the geographic coverage of agents, draft agency agreements, services to be provided by agents, policies and procedures, risk assessment report, and the mobile financial services provider’s agent KYC policy.
Assuming approval by the CBM, the mobile financial services provider must make public a list of its agents, keep the CBM notified of the GPS locations of agents/areas of operation, and submit to the CBM an audit report within six months after the start of mobile financial services operations. Naturally, the mobile financial services provider is legally responsible for the actions of its agents to the extent the actions relate to the scope of the agents’ appointment.
Systems, technology and consumer protection
The mobile financial services provider is required to implement and maintain systems and technology for consumer protection, anti-money laundering measures and other matters subject to CBM satisfaction. There is also a requirement on the mobile financial services provider to maintain records and oversight of its operations, and to make records and books available to the CBM on request. The mobile financial services provider must report to the CBM as prescribed and in the event of any substantial change to its system or business model, and submit audited accounts to the CBM within three months of the close of each financial year, amongst other reporting requirements.
In addition, the mobile financial services provider must maintain a 100% float of liquid assets in trust, which may not be comingled with other funds – interest earned must be declared to the CBM and used for the benefit of its customers. The trust account must be reconciled no later than 4pm each day and any deficiencies rectified by 12pm the following day.
So what transactions are permitted under mobile financial services?
The Regulations allow a broad scope of domestic transactions, including cash-in/cash-out, although international transfers would only be permitted with CBM approval. Transactions must be in Myanmar kyats, and account holders are entitled to have their credits redeemed at any time.
The KYC requirements depend on the size of transfer (although payments to merchants, financial institutions, and for utilities, taxes/government fees do not count towards the limits):
Can a mobile financial services provider obtain an MIC permit?
A mobile financial services provider clearly does not require an MIC permit to carry on business, but there is nothing in the Foreign or Myanmar Citizen Investment Law or regulations which would prohibit a mobile financial services provider from obtaining an MIC permit. Typically as a matter of practice, service companies are not given much priority in receiving MIC permits, although nonetheless, certain service companies have been successful in obtaining MIC permits in the past.
A potential mobile financial services provider should definitely consider applying for an MIC permit for the mobile financial services activities, and particularly if the provider intends to make a significant capital investment in Myanmar. The obvious benefits of obtaining an MIC permit include the potential tax incentives, such as a five-year tax holiday, assurances that the business will not be nationalised during the investment period, and assurances that the investor will be able to repatriate funds in the same currency as they were brought into Myanmar.