In 2017 the local financial sector continued the strong growth that has characterised the industry in recent times, with commercial banks and microfinance institutions (MFIs) seeing a robust expansion in loans and deposits throughout the year, according to the National Bank of Cambodia’s (NBC) annual report released yesterday.
The loan portfolio in the MFI sector reached $4 billion in 2017, amounting to an increase of 25.5 percent year-on-year. Up to 1.7 million Cambodians took out loans with an MFI at some point in 2017.
Most loans were taken out by small entrepreneurs in the agriculture sector (26.9 percent), retail (18.6 percent), service (10.3 percent), logistics (4.5 percent) and construction (3.3 percent). About 33 percent of total loans in the sector were used for non-commercial purposes.
The report also showed that the total deposit portfolio grew by 35.6 percent, reaching $2.02 billion.
“Microfinance institutions have diversified their financial services such as money transfer, mobile banking service, ATM and micro-insurance,” the report says.
The numbers for commercial banks are also impressive, with loans increasing by 16.8 percent to $16.2 billion.
Total deposits in the banking sector rose by 23.3 percent to $17.2 billion.
The majority of loans in the banking sector went to retail (17.6 percent), wholesale (12.4 percent), agriculture, forestry and fisheries (10.3 percent) and construction (9.5 percent).
“The progress of financial technology and the increase of demand from Cambodian people has pushed the bank and microfinance sector to develop and upgrade themselves by building more branches, diversifying services, boosting efficiency and quality of products and operation, increasing liquidity and strengthening good governance,” the report reads.
Speaking at the central bank’s annual meeting at Kampong Cham yesterday, NBC governor Chea Chanto said the main goal for the NBC in 2017 had been to strike the right balance between financial inclusion and financial stability to boost economic activity.
He also said that they have successfully limited liquidity risks for commercial banks by increasing access to finance.
In the MFI sector, the NBC capped the interest rate at 18 percent, which expanded access to finance for everyday Cambodians, farmers and SMEs, accelerating business activity in the country and boosting living standards, Mr Chanto said.
“Last year, the banking sector serviced more than 600,000 young adults, pushing financial inclusion in the country to new heights, and reaching 56 percent of the adult population in the country.”
Sok Voeun, the CEO of LOLC Microfinance and a member of the board of directors at the Cambodia Microfinance Association, told Khmer Times that 2017 had been a great year for the financial sector, with clients growing between 2-3 percent industry-wide, he explained.
Non Performance Loans (NPLs) also grew, from 1.3-1.4 percent in 2016 to 1.6-1.7 percent in the year that just ended. However, Mr Voeun said he expects NPLs to decrease in 2018.
Mr Voeun predicts the loan portfolio will expand in 2018 as the interest rate cap becomes effective.
“In 2017 the interest rate cap wasn’t really having an effect since most customers were still under old contracts,” he said. “However, in 2018 clients will be moved to new contracts with updated terms and conditions, where the interest rate cannot surpass 18 percent.
“This is the year where we implement the interest rate cap, so it will have an impact in the industry. It will be a better year for us than 2017.”
Mr Voeun said the interest cap can be a positive development for the sector because it will make it easier for customers to respect the conditions of the loan and repay on time.