Banks become partners in crisis

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Benevolent partner is the role banks are adopting to assist their customers during the testing times ushered in by the Covid-19 pandemic.

Commercial banks in Cambodia, both local and foreign, have employed a slew of strategies to support their business clients trapped in financial dire straits following the outbreak.

Taking a cue from the National Bank of Cambodia, which directed banks to restructure loan repayments to ease the financial burden on borrowers, many commercial banks have followed suit.

It is a two-way street between lenders and borrowers. Banks need to recover their loans quickly as a fatigue-prone economy could further wilt under the pandemic’s heat, which has even cut the global economy’s growth.

While retail borrowers struggle to repay loans due to sudden dips in income after businesses stalled during the lockdowns, they are nevertheless making a slow comeback.

Pre-emptive financing and easy loan repayment schemes topped most banks’ list of priorities for those in the entertainment, restaurant, tourism and hotel industries – particularly for vulnerable groups such as the self-employed and small business owners.

At an opportune time for an economic lifeline, the strategies form part of prudent moves to stem cash flow problems.

These efforts have to some extent helped companies keep their businesses running and saved thousands of jobs, while borrowers continue to repay their loans during this critical period.

Proactive measures to assist borrowers by restructuring their loan portfolios were implemented in a timely manner, helping in sustaining their businesses – and in keeping the economy on track.

While so far so good, these are quick-fix solutions and do not come with long-term, sustainable answers.

The future remains uncertain as the black swan event Covid-19 continues to trouble nations, while outside the Kingdom the economic outlook appears a little grim.

While a slowdown in international travel will have a direct impact on Cambodia’s tourism sector, delays in business expansion, less demand for finished goods and a fall in household incomes that would impact consumer spending could all cause unease in the financial market and the banking sector.

The banking sector, therefore, is crucial in finding financial equilibrium – it needs to ensure enough liquidity is available for businesses to survive and also prevent a build-up of non-performing loans detrimental to the sector.