ADB Approves $40 Million Loan

Sum Manet / Khmer Times No Comments Share:
The majority of Cambodia’s unbanked population are in rural areas. KT/Chor Sokunthea

The Asian Development Bank (ADB) approved a $40 million loan and a $600,000 technical assistance grant on Friday to help strengthen Cambodia’s financial sector and promote financial inclusion within the country’s unbanked population, according to the ADB’s statement.
 
The loan and technical assistance grant was given through the ADB-funded Inclusive Financial Sector Development Program (IFSDP). When implemented, the program is expected to produce potential economic gains of up to $391 million a year, or 2.3 percent of the country’s gross domestic product.
 
“The IFSDP will help to bring these people into formal financial services by supporting the development of an efficient and stable financial sector,” the statement said.
 
“Policy support and enhanced consumer protections will be expected to benefit rural households, farmers, and small and medium-sized enterprises. The program will upgrade existing financial sector infrastructure to support the introduction of new services and products,” added the statement.
 
Cambodia’s impressive economic growth over the past several years has pushed poverty levels from 47.8 percent in 2007 to 13.5 percent in 2014.
 
However, according to  the ADB, many Cambodians are still vulnerable to poverty, particularly those in rural areas – where 90 percent of poor people live — and with 41 percent of the population living on $2 a day or less.
 
“The financial sector should be further developed, with only 59 percent of the population having access to formal finance, and about 30 percent of the adult population excluded from any form of financial services,” said the ADB statement.
 
“Cambodia’s economy has been performing well but achieving inclusive growth has been a challenge, particularly among people who don’t have access to formal financial services,” said Hiroyuki Aoki, senior financial sector specialist at ADB’s Southeast Asia department. “The project will help the Cambodian government to develop its financial sector to reduce financial exclusion and promote inclusive growth.”
 
A financial inclusion ecosystem involving multiple businesses may work better for poor people in terms of both increasing the range of options for services and making those options available to poor people in an affordable way, Leonie Lethbridge, CEO of ANZ Royal Bank (Cambodia) said recently.
 
“The financial inclusion ecosystem helps improve the traditional financial service system. Such an ecosystem represents a shift from vertically integrated business models that limit efficiency and scale,” said Ms. Lethbridge.
 
“One of the elements of the financial inclusion ecosystem is financial literacy which is really important because people need to know what decisions they have to make. And that comes with skills and understanding,” she added.
 
Ms. Lethbridge pointed out the ecosystem was important for Cambodia due to the combination of numerous financial institutions that take deposits and give out credit.

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