Introduction Commercial banking in Burma started in Burma before it gained its independence in the early nineteenth century. The banks supported chettiar lending. There were more foreign banks than indigenous banks from the Burma citizens. An example of the Burma commercial bank was the Dawson’s bank which began in the early nineteenth century. Most of the banks primary goal was to focus on the trade industry or business in Burma. Merchant and traders who were British bankers evolved in to institution that took part in international banking.
The institutions were referred to as exchange bank that majorly financed trade in Burma. They were confined majorly in Rangoon and took deposits from professional from Burma, Europeans managers, growing number of wealthy Burmese and Indian business owners. Exchange bank was also involved in bill of exchange which is a device that allows an exporter to sale their exports in their own currency. Later the banks started giving out credits due to the bill of exchange and were short term, mostly for 60 days but never more than 90 days.
The trade finance in Burma brought about the provision of overdraft to qualified firms. The banks also financed the government with funds for development of the country. Exchange Banks The exchange bank was involved mostly in trade finance and bill of exchange. Bill exchange was 60 percent of the business conducted by the exchange banks. The banks gave out long term loans and mostly short term loans. This lending were usually given to the agricultural sector and trade in Burma. The short term lending was mostly given in terms of overdraft which the banks profited from the interest rates on them.
Long term lending was very hard to acquire unless one has collateral for the bank. Most of the collateral included gold bullion , primary commodity, share equity in local company, immovable property and government of Indian securities. Sterling was the accepted currency and it was used in two thirds of the international transaction to the end of nineteenth century. The British bank in Burma included Chartered Bank of India, Australia and China, Lloyds bank, Imperial Bank of India, Mercantile Bank of India, National Bank of India, Thomas Cook and Sons Bankers, and Hongkong and Shanghai Banking Corporation.
They were famous of giving wholesale finance to the Burmese agriculture. Imperial Bank of India played a major role in the economic development of Burma before the Second World War. The Chartered Bank started the ‘produce guarantee system’. This financed the milling and storage of rice and storage and marketing of sesame and groundnuts. Hongkong and Shanghai Banking Corporation (HSBC) were majorly concerned with financing Burma-Malaya trade and Chinese businesses operating in Burma. The Burma final HSBC project was providing China with a loan to construct ‘Burma-Szechuan Railway’.
Mercantile Bank of India and National Bank of India financed the international trade via the issuing of bill of exchange. Thomas Cook and Sons Bank were confined to issuing and redeeming traveler’s cheques and letters of credit, and small scale foreign exchange transactions. The non British exchange banks in Burma were National City Bank of New York, Bank of China, Overseas Chinese Banking, Bank of Communication, Yokohama Specie Bank, and Central Bank of India. National City Bank of New York was a conservative lender in Burma in terms of letters of credit which was majorly for trade between Burma and China.
Yokohama Specie Bank played a major role when Japan occupied Burma. During that time its major role was to finance the Japan military that occupied Burma. They had one branch in Rangoon before Japan occupied Burma but it was asked to vacate during the declaration of war between Britain and Japan. The three exchange banks from china were in Burma to finance and boost the Burma- China trade by opening Burma Road. They also handled the remittances of the Chinese nationals in Burma. Central Bank of India concentrated on the trade between Burma and India.
It shortened the transaction time in relation to exchange bill to finance trade by the use of telegraphic transfer. The bank’s profit Burma was gotten from foreign exchange commission and margin. The two Burmese’s bank was Dawson’s Bank and U Rai Gyaw Thoo and Company. Dawson’s Bank was founded by Lawrence Dawson in 1905. He started the bank to liberate his fellow Burmese from the high dept for their lands from the chettiar. This is by helping them to redeem their land from them. He paid the dept Burmese land owners owed the chettiar and allowed annual repayment.
He wanted to promote agricultural activity in Burma. The bank headquarters was in Pyapon Township in the heart of Irrawaddy Delta. Dawson’s Bank philosophy is: The bank to be closer to the cultivators to stop temptation of misusing or spend the money in the city and enable people to come to a bank with comparative low rate rather than going to loan shark who provide extreme rates. To have a field staff to make sure the money granted to be used for the purpose it is lent for (agriculture). U Rai Gyaw Thoo Company was based in a township called Akyab.
As a bank its main objective was land mortgage and making advances on Gold. It was one of the major land owners due to loan foreclosure. They charged high interest rates on loans and overdraft and gaining substantial margin in the rate it paid on the deposits. The reasons why there are less Burmese banks are: Their energies were taken by the colonization of the delta. There are no Burmese Tatas or Birlas. Burmese do not have experience and decline to work long hours to gain the experience They do not have the confidence of Burmese promoters, directors and managers.
There is some cultural reason why the Burmese didn’t start many exchange banks. They were Buddhist and traditionalist. The Burmese elite participated in politics and the bureaucracies while the others in agriculture. They left the foreigners with financial firms while they participated in agriculture. When depression hit them during 1930s many banks collapsed. Rice exports price reduced immensely year after year and banks reduced lending to sustain themselves during that depression. Dawson’s Bank voluntary liquidated it assets in the late 1931. War Rangoon fell in the forces of Imperial Japan on March 7 1942.
Burma government fled to India and British rule in Burma came to an end. The exchange banks in Burma prepared themselves for the invasion months before it happened. Charted bank got permission to send its securities Calcutta by sea which was a policy adopted by other exchange bank. A special requisition train transported the exchange banks staff, their cash and bullions, and other important remaining records to Mandalay on 17 February 1942. National City Bank of New York did not board the train; instead they got three trucks and a jeep to take the bank records and staff to Lashio.
Dawson dug a hole in his garden to hide his gold plates and jewelry. Yokohama Specie Bank returned to Burma after Imperial Japan invaded Burma. They financed Japan’s military that was in Burma. They even helped in the financed of the Burma’s government that Japan placed funds. Other two Japanese banks came to Burma during the war, Bank of Chosen and Azad Hind Bank. Banking Policy in the Parliamentary Democracy Years The parliamentary democracy year started when Burma got independence. At the time of independence the country’s economy was worse.
It was brought back to normal through the exportation of rice during the time of Korean War 1952. The parliament intervened to develop Burma’s economy by, firstly implementing the Land Nationalization Act 1948, which would lead to development of viable financial institutions. The Act stated that; the state is the ultimate owner of all lands; no ownership of large piece of land and state shall have the right to control possession of any land. Land repossessed shall be distributed for collective cooperative farming or to agriculture tenants.
The parliament commenced of state agricultural bank operation 1949. State agriculture bank was chaired by J. S. Furnivall after being invited by new Burmese government. Furnivall’s committee projected a tripartite structure for state agriculture bank which at the base would be village banks. Banking policy in the parliamentary democracy era were efficient, they were made avoiding colonial banking failure. The state agriculture committee avoided repetition by implementing principles like; bank must rest on foundation in the village.
Secondly loan making and recovery procedure must be simple to an ordinary villager. Thirdly procedures conducted inside the village should be conducted on democratic principles. Finally took the job to educate the people in their financial responsibility and their grounds on expenses i. e. providing indirect supervision. Parliamentary democracy year, village banks came to grow up from the state agriculture banks. Village banks were controlled by village committee led by a headman as their chairman. The committee members were elected by the village inhabitants making.
Village banks work was to manage loan lending, deciding and distribution, and ensuring the required repayment process. It provided short term loans to the cultivators and also accepted deposits. The village banks were independent structures evidently predicted on contrary philosophy. Furnivall noted villagers needed to borrow a few rupees for Petty daily requirements not fulfilled by village banks. The government decided to establish a state owned pawnshop. Obtaining credit from it was simple almost every item for pawning was accepted e. g. farm tools.
Initial pawn loan time was five months after that the loan item principal is paid and the article returned. Failure to release and cash in the pawn item, it will be auctioned. Most foreign banks were closed due to political unrest and the government lending private firms sector e. g. National city bank of New York and Lloyds bank. Dawson bank was first affected by legislation of Land Nationalization Act. It ran short of capital during the war and ability to make continuing agriculture loans was halted. In 1950 it regained its economic level and it became large again.
Most loans were secured including precious stones and gold. It operated for a decade and later closed. The parliament founded a state commercial bank; it raised the authorized capital of 50 million and allowed provision for the remaining authorized capital sold to the public. Majority of the directors represented the government. The purpose for state commercial bank was to; accept deposits to mobilize savings, support new productive techniques, grant credit for industrial, farming and business purposes. Banking Policy in the Years of Military Rule.
Burma’s parliamentary era came to a close on 2nd March 1962. The army led by previous Prime Minister General Ne Win overthrew the existing government. They suspended the country’s constitution 1947 with revolutionary council government. The new regime political philosophy was made of ‘the Burmese way of socialism’. The banking policy in the military rule has greatly affected the economy of the country. Foreign and domestic banks were out of favor from the birth of Ne Win revolutionary council. Banks were nationalized under the new regime and agglomerated in to ‘people’ bank of the union of Burma.
Ideologically as banks and bankers were in general held to be not in agreement with Burmese ‘way to socialism’. The revolutionary council sort to nationalize private banks to solve banking issues. They intended to have banks which they could take control on them. The government was ignorant on the monetary matters so they decided whenever demand was high to print more money in the country. Burma’s currency printing sifted from Britain to Burma itself. The banks name changed from their real names to serially number ‘peoples’ bank (1 to 24) to show a sign of socialism.
Government assigned new leaders to control the banks; the military officers were the bank’s general managers, assisted by transferred staff from state commercial banks and union bank of Burma. New regulations on interest rates were introduced in banks i. e. there were strict interest rates controls on bank rates pay on deposits and receiving of loans. Bank depositors were restricted to one account in one bank. They were also restricted on the amount to deposit, they could not deposit more than K10000 per month or more than K50000 per year.
Bankers were further limited to a maximum of two withdrawals from their accounts per week, and their withdrawal was not to be more than 10% of deposit. There was a massive fall in deposits in the state commercial banks because of combination of state boards and corporation into a single ‘union government consolidation fund account’. The government argued that such boards withheld unnecessary large balances, and therefore transferring the bulk sum to their account for its own use. In 1970 all the peoples banks and the original state owned banks were merged to a single entity i. e. peoples’ bank of union of Burma.
It became the central bank that conducted monetary policy. It was the sole agricultural, commercial, foreign exchange banks and it regulated the issue of notes. The new government tried to raise agriculture production by providing them with a certain sum of money to each cultivator. Burma was now experiencing inflation; there was shortage of commodity, growth in rice price and black-market in foreign currency. Union banks of Burma had lost their independence freedom. After the months of an internal military coup fight 1988 brought an end to military rule in Burma and replaced it with state law and order restoration council.
Conclusion During the colonial period Burma bank policy was chettiar. There were many exchange banks, especially the Britain exchange banks and from its colonials. Two Burma banks were the only available indigenous bank. Dawson’s bank was the only exchange bank that truly cared about the Burmese cultivator’s development. Depression period made many banks gain lost of losses and reduce their lending power to the Burma citizens. The war between the Japan and British made the exchange banks to flee and Japan’s Yokohama Specie Bank returned and became the major exchange bank in the area.
They majorly concentrated in financing the Japan military in Burma instead Burma’s development. The parliamentary rule at least tried to improve the economy of Burma. It encouraged growth of banks. The effects of banks made people invest more simply by borrowing from banks and depositing money. Farmers were able to meet the necessary support from the banks loans increasing level of exports. Military rule clearly shows that bank cannot rule to the interest of the people but benefit. The social way of ruling created an immense inflation in the country. The standards of living switched to a difficult one.
Banks were abused and denied their freedom to rule to the benefit. Let Burma be an example to all other countries around the world. Bibliography KYI, K. M. (2000). Economic development of Burma: a vision and a strategy; [a study by Burmeseeconomists]. Stockholm, Sweden, Olof Palme Internat. Center. SINGH, U. S. (1979). Burma and India: 1948-1962; (a study in the foreign policies of Burma and India andBurma’s policy towards India). New Delhi [u. a. ], Oxford & IBH Publ. Co. TURNELL, S. (2008). Fiery dragons: banks, moneylenders and microfinance in Burma. Copenhagen, NIASPress.