Among a raft of directives issued to newly-privatised banks in Burma is a rule that central bank financiers do not loan money to their own business concerns.

It comes as the Burmese government continues a sell-off of state-owned businesses; analysts have warned that those most likely to benefit from the large-scale privatisation are wealthy cronies of the ruling junta. The four new banks are Asia Green Bank, owned by junta crony Tayza, Ayerwaddy Bank, Amara Bank and Shay Saung Bank.

There has also been a revision of the amount that the private banks are allowed to invest, from 15 million kyat (US$15,000) up to 10 billion kyat (US$10 million), the Weekly Eleven Journal said.

The initial figure was implemented when the Burmese banking sector was first privatised in 1992, and was not altered with the huge changes in currency value since. This could amount to a credit bonanza, but economic analyst Aung Thu Nyein has expressed concern over inflation; the UN in 2008 said the inflation rate was at 53 percent, while Burmese government figures place it at around 10 percent.

Credit is a particularly problematic area for Burmese business, Aung Thu Nyein claims. “There are a lot of contradicting facts in banking laws and regulations. In the agricultural sector, no private banks are allowed to lend money to agriculturalists, except for the Myanmar Agricultural and Rural Development Bank, the Myanmar Fisheries and Livestock Bank and the Cooperative Bank.

“However, now micro-credit schemes operated by INGOs are working in grey zones and many so-called rice-based private companies are lending to farmers,” he said.

The farming sector receives a miniscule 0.4 percent of credit created, despite accounting for over 50 percent of the nation’s GDP and providing employment for 70 percent of the population. The lack of credit means many farmers do without essential productivity-increasing expenditures, such as purchased fertiliser or weed killer.

Moreover, as is standard in Burma, credit is likely unattainable without the receiver of a loan being able to prove they possess collateral worth as much as the loan is worth.

Even if credit to agriculture remains limited, the recent move to raise the bar on banks’ investments will look to stem a “trend of continual decline – with the private sector’s relative share of credit falling by nearly 25 percent in the last five years,” a recent report by Burma economics expert, Sean Turnell, said.

Questions will however remain over the impartial nature of Burma’s banks. The power within the private sector of junta cronies such as Tay Za, who owns the Htoo Group, and Zaw Zaw, who owns the Max Myanmar, will make enforcement of the self-loaning rule difficult. Tay Za is thought to be close to senior general Than Shwe whilst Zaw Zaw is believed to be a close associate of junta number two Maung Aye. As a result both men took over many government assets in recent privatisation drive.

The new banks meanwhile have been told not to possess capital of more than ten times their loans. Interest rates meanwhile will be more flexible for the private banks with a window of 6 percent allowed on the Central Bank’s 17 percent loan interest rate and, 12 percent on deposits. These rates are well below the rate of inflation, making investment in Burmese banks economically nonsensical.