YANGON (AFP) - As it strives to become Asia's next economic star, Myanmar has set its sights on overhauling its battered and distrusted banking system, a move which could pave the way for foreign lenders to open branches.
Legislation handing independence to the Central Bank of Myanmar is set to be scrutinised by lawmakers over the coming weeks, in the latest reform of an economy which was for decades shambolically mismanaged by the former junta.
The measure will be "a first step in a broader financial sector reform" geared at "strengthening and liberalising" Myanmar's enfeebled banking sector, according to Mr Rajiv Biswas, economist at research group IHS Global Insight.
It is also likely to prove complex, in a country where savings are often hoarded in gold and banks are viewed with deep suspicion after a number of scandals and currency collapses.
Myanmar currently has 19 private banks, as well as four state lenders, but these are "relatively weak in term of capitalisation", according to Mr Romain Caillaud, Myanmar director of business advisory firm Vriens & Partners.
Strict regulations from the central bank - including a ban on loan terms of more than one year and the imposition of fixed interest rates - have also strangled competition among private lenders, he added.
State banks are not subject to the same rules, but they effectively repel borrowers with prohibitively high risk valuations for loans.
Nationalised by the military regime which came to power in 1962, banking disintegrated with the economy during the bungled implementation of socialist-style policies which were laced with superstition - the kyat currency was at one point issued in denominations of nine, an auspicious number.
That demise was deepened by US financial sanctions, which have been partly lifted in response to sweeping changes since the end of junta rule in 2011.
But Myanmar's banking system is yet to recover.
It suffered a hammer blow in 2003 when three banks collapsed in a crisis exacerbated by Central Bank policies, such as recalling loans from borrowers.
The kyat quickly became scarce, paralysing the economy and deeply shaking public confidence.
"I don't save in the banks," said Ms Hla Hla, a nurse, as she browses for a necklace at a gold shop in Yangon.
"At least I can wear this jewellery while I am saving," she jokes.
Only between one and two million of the nation's 60 million people use bank services, according to Mr Ye Min Oo, managing director of Asia Green Development Bank, one of the country's private lenders.
Another major problem is the lack of bank branches.
Mr Ye Min Oo said in total there are around 400 branches across Myanmar - a country equivalent in size and population to France which has around 39,000 outlets.
"Most ordinary people think banks are nothing to do with them," he said, urging the roll out of more branches "to encourage economic development".
Without a functioning banking system, experts say it will be impossible to channel the investment needed to resuscitate the country's moribund economy.
"They (private banks) cannot support businesses to perform at an international standard," said Mr Hnin Oo, vice chairman of the Myanmar Fisheries Federation.
A new quasi-civilian government has won plaudits - and the removal or suspension of many key financial and economic sanctions - with a raft of reforms since coming to power in 2011.
Dramatic changes have included the election of democracy champion Aung San Suu Kyi to parliament, with shifts also made to try and kick start the economy, including unifying the country's multiple exchange rates and passing a law to help smoother foreign investment.
But Mr Hnin Oo said that only "minor" progress had been made in banking, with some credit cards and a smattering of ATM machines now in use.
Hope for change lies in the opening of the sector to foreign banks with financial muscle and industry expertise.
Minister for Finance Win Shein suggested in October that overseas firms could be allowed into the country in stages, in a speech published on the website of the International Monetary Fund (IMF).
An initial phase would be the creation of joint ventures between foreign and domestic banks, with the eventual aim of fully opening the country to subsidiaries of outside lenders.
Foreign banks can currently only open representative offices without actually providing services.
IHS's Biswas said parliament is likely to give the green light for joint ventures this year and enable foreign banks to open branches in 2015.
He added that the country's failure to open up the sector so far has prevented "foreign capital, technology and innovation from strengthening Myanmar's banking industry".