Khmer Times/May Kunmakara Tuesday, 13 December 2016 1238 views

NBC: Riel Loans Still Low

The National Bank of Cambodia (NBC) revealed Friday that of a total of $16 billion given out in loans by the country’s financial sector as at September 30, only about 4.5 percent were made out in riel while the rest were in US dollars. 
 

“We don’t expect financial institutions to force their customers to take out riel loans, but we do expect them to provide better terms to encourage them to borrow in the local currency,” NBC director-general Chea Serey told Khmer Times.
 

Ms. Serey was commenting on a prakas, or directive, issued by the NBC on December 6 which will be effective until the end of 2019, instructing commercial banks and microfinance institutions to make out more riel loans to their customers, in a bid to promote the use of the national currency.
 

The prakas states that all financial institutions should have at least 10 percent of their loan portfolio in riel.
 

“Customers have the right to decide on whether to borrow in local or foreign currency, based on their business needs. But each institution has to encourage them to take out loans in riel and at least 10 percent of their loan portfolio has to be in local currency to comply with the prakas,” said the NBC announcement.
 

Three days after the directive was issued, the NBC when releasing the total loan figures as at September 30, explained that financial institutions still preferred to disburse amounts in US dollars rather than use the local currency, despite the demand for riel in rural areas.
 

“This is the reason why of the total $16 billion borrowed, only 4.47 percent of the loans were made out in riel,” said the NBC in a statement.
 

Ms. Serey said that the prakas was in line with the development strategy for the financial sector to further develop Cambodia and promote economic growth.
 

“We don’t expect financial institutions to force their customers to take out riel loans, but we do expect them to provide better terms to encourage them to borrow in the local currency. The prakas will help promote the use of the riel in the country,” said Ms. Serey.
 

When asked on whether the new directive applied to other commercial sectors, Ms. Serey said it was out of the central bank’s control.
 

“Financial institutions are under the oversight of the NBC, while commercial enterprises are not. If I remember correctly there is already a prakas issued by Ministry of Commerce in 2013 requiring all shops to put price tags in the local currency,” she added. 
 

In Channy, president of Acleda Bank, said yesterday that of the bank’s total loan portfolio of about $2.7 billion, only five percent – or $100 million – was in riel.
 

“I think it is a good thing to promote the use of more riel in our economy because we seem to be using too much foreign currency. We seem to have more demand for riel in rural areas,” he said.
 

Mr. Channy said his bank was committed to meet the requirements of the NBC’s prakas.
 

“The NBC gives us three years till the end of 2019 to meet the 10 percent loan portfolio in riel. I think we will exceed the target of 10 percent.”
 

The NBC’s Ms. Serey said that the prakas would be implemented over three years and added that financial institutions would have had more than enough time to comply with the directive.

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