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Myanmar: All You Need to Know About the Notification on the Establishment, Operation & Business Activities of Non-Banking Financial Institutions 

by Segolene Leffy

Published: February, 2021

Submission: February, 2021


On 26 January 2021, the Central Bank of Myanmar (the “CBM”) issued Notification1/2021 (the “Notification”) outlining the requirements and specifications for the establishment, operation and business activities of non-bank financial institutions (“NBFIs”). This Notification is effective from 26 January 2021.

     1. Applicability of the Notification

This Notification is applicable to companies which intend to establish the business of an NBFI and the existing NBFIs conducting the following activities:

  • Finance Company Business – a business primarily engaging in the financing of goods or services purchasing with funding other than deposits from the public;
  • Leasing Business – the business of letting or sub-letting movable property on hire, regardless of whether the letting is with or without an option to purchase the property; and
  • Factoring Business – the business of financing accounts receivable.

Any entity intending to undertake NBFI activities must apply for and obtain a registration certificate from the CBM under this Notification.

     2. Applicability of the Notification on Foreign Players

Importantly, this Notification provides an update as far as foreign ownership in an NBFI is concerned. While there was no restriction under the Financial Institutions Law (“FIL”) for foreigners to conduct NBFI business, the CBM as a practice had only issued licenses to 100% local NBFIs. Thus, the CBM’s practice had excluded foreigners to own even one share in an NBFI regardless of the fact that even if a foreign investor owns up to 35% of shares it would be deemed to be a Myanmar company.

In the present Notification, it is stated that CBM’s prior approval would be required if an NBFI undertakes a change in the ownership of the legal entity which results in the change of the status of a Myanmar company to a foreign company or vice versa. Therefore, the Notification suggests that foreigner companies (above 35% foreign shareholding) are also eligible to apply for a registration certificate under this Notification and upon receiving the approval from the CBM would be permitted to conduct NBFI business.

However, an unofficial discussion with CBM officials on a working level suggests that the CBM is presently allowing only local entities to apply for a registration certificate under this Notification. This includes legal entities with up to 35% foreign shareholding (considering the Myanmar Companies Law 2017 recognizes a legal entity with up to 35% foreign shareholding as a local company).

Nevertheless, we understand that the Notification is not restrictive in its application, and the CBM would sooner than later approve ‘foreign companies’ to conduct NBFI business and issue the registration certificate.  

     3. Application Procedures – Relevant Documents and Timeframes

The Notification outlines the specific requirement to apply for an NBFI registration certificate. The documentation requirements include the corporate documents of the legal entity, along with the details of shareholders, the directors, and the organizational structure. The types of services that the entity aims to provide must also be furnished. Details of the source of paid-up capital, budget forecast, and the administrative arrangements of the entity are required along with the application.

The entity must also furnish a declaration that they will abide by all applicable laws of Myanmar and also pay the applicable fees. Additionally, the CBM may require submission of any applicable documents as a part of the document dossier.

Depending on the merits of the application, the CBM may approve or reject the application within six months from the date on which all relevant documents are submitted. If the application is rejected, the CBM must provide detailed reasons for such rejection in writing.

     4. Permitted Activities under the Notification

The registered NBFI must only engage in activities permitted under the registration certificate issued by the CBM. Based on this Notification, the NBFIs should be allowed to conduct leasing and factoring businesses in addition to small-ticket loans for the purchase of goods and obtaining services.

However, NBFIs are still prohibited from accepting any deposits in accordance with the Financial Institutions Law. Deposits are defined as any sum of money, which is repayable by a legal entity along with a consideration either in the form of money or anything equivalent to money.

The Notification mandates an approval from the CBM for any change in shareholding, change in the status of the company (conversion from local to a foreign company and vice versa), change in capital levels or business structure. Any change of office, opening or closing of branches must be undertaken with the approval of CBM. Changes to the company name and/or logo also warrants an approval from the CBM. CBM being the regulatory authority guides and approves any form of structural and operational changes of the NBFI.

     5. Management, Reporting and Compliance Requirements

The NBFIs must have at least three directors on its board and they must be responsible for the proper functioning of the NBFI. The officials forming the senior management team must have experience in finance or other relevant businesses.

The interest rates and fees for lending by the NBFI may be prescribed by the CBM. On a daily basis, the NBFI must display the interest rates, default interest rates, fees and commissions related to the loan at a conspicuous place at the head office and branch offices. The NBFI must also submit periodic reports on its lending rates to the CBM in a format that it specifies.

The NBFIs must carry out their accounting and financial reporting in accordance with International Accounting Standards and International Financial Reporting Standards. As an annual compliance requirement, the NBFI must submit a copy of its audited financial statements to the CBM within three months of the financial year-end. The CBM may require additional documents/information as it deems fit.

     6. Conclusion

This Notification will go a long way to formalize foreign investments in the NBFI sector in Myanmar. The governance requirements specified under this Notification will help to monitor the activities and maintain the transparency of NBFI operations.

We trust that this information is helpful. Please let us know if you have any questions or would like to discuss the above or any other legal issues in Myanmar.


The information provided here is for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.


Contact Author

Nishant Choudhary

Partner, Deputy Managing Director & Head of Banking
and Finance Practice, Myanmar
[email protected]

Arijeet Nandi

Junior Legal Adviser, Myanmar


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The post Myanmar: All You Need to Know About the Notification on the Establishment, Operation & Business Activities of Non-Banking Financial Institutions appeared first on DFDL.


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