A staff at a private bank counts money in Phnom Penh in 2022. Outstanding loans in the banking sector swelled by more than 20 per cent, and deposits increased by around 15 per cent. Heng Chivoan
The Association of Banks in Cambodia (ABC) and the Cambodia Microfinance Association (CMA) will develop plans to join the government in the fight against informal lenders. Such lenders are seen promoting their services online and through social media, and are unregulated.
At a February 7 press conference held to discuss the situation of the banking and financial sector and pre-emptive measures to respond to informal financial services, ABC vice-president Rath Sophoan warned of widespread illegal practices.
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He said this activity has caused many socio-economic consequences through the use of high interest rates, threats and intimidation, fraudulent contracts, and excessive profits. These practices have led to many borrowers falling into crippling debt.
Sophoan added that unregulated lending leads to many social problems, with the association having difficulty accessing information. This has affected the financial stability, public trust, financial inclusion and growth of the banking sector in Cambodia as a whole.
“This year the ABC and CMA plan to provide education and training to the public on which financial institutions are legal and which are illegal. This will help the people make better financial decisions,” he continued.
Sok Voeun, ABC board member and chairman of the CMA, said the associations will raise awareness of how to avoid obtaining credit from informal lenders with community authorities, so they can educate people in their areas or responsibility.
He explained that the CMA will prepare a list of institutions that have a valid licence from the National Bank of Cambodia and distribute it as widely as possible, so people will have the information they need before making any rash financial decisions.
“Providing credit via online services has its advantages and disadvantages. It is fine if the lender has a valid license, but can be risky otherwise. What we are seeing today is that almost all online services are unlicensed by the central bank. Online lending is having a huge impact on the reputation of the microfinance sector, and thus the banking sector as a whole,” he added.
According to the ABC, in 2022 the Cambodian banking system made a significant contribution to maintaining macroeconomic stability and supporting economic growth, estimated at 5.1 per cent for 2022. The riel’s exchange rate against the US dollar has been kept stable at around 4,102 riel per US dollar, and the 2022 inflation rate was 5.5 per cent.
Financial institutions currently operating in Cambodia include: 60 commercial banks; nine specialised banks; five deposit-taking microfinance institutions (MFIs); 82 non-deposit-taking MFIs; 224 rural credit institutions; 16 financial leasing companies; five third-party processors; 34 payment service providers; one credit information sharing service provider; six foreign bank representative offices; and 2,869 money exchange businesses.
Assets in the financial sector grew by about 14.5 per cent last year, a figure that dips to 13.2 per cent when considering the banking sector alone. Outstanding loans in the banking sector swelled by more than 20 per cent, and deposits increased by around 15 per cent.
In the “direct banking sector”, outstanding loans rose by 19 per cent and deposits were up nearly 10 per cent, with credit and deposit accounts reaching about 1.5 million and more than 11 million, respectively.
