The National Bank of Cambodia says the local banking and microfinance industry saw healthy growth in 2018, with total assets expanding by 19.4 percent year-on-year to reach about $40 billion.
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According to NBC’s annual report, in commercial banks and microfinance deposit-taking institutions (MDIs) deposits rose by 15.3 percent last year, surpassing $22 billion, while loan portfolios increased by 18.8 percent, amounting to nearly $24.5 billion.
There are now 6.2 million deposit accounts in Cambodian commercial banks and MDIs and 2.6 million loan accounts in commercial banks and microfinance institutions (MFIs), it says.
According to the report, loan portfolios in the MFI sector reached $5.4 billion in 2018, an increase of 34.2 percent. Up to 2.5 million Cambodians took out loans with an MFI last year.
Most loans were taken out by small entrepreneurs in the agriculture sector (22 percent), households (33 percent), trade (22 percent) and service (11 percent).
“Microfinance institutions have diversified their financial services with money transfer, mobile banking, ATM and micro-insurance services,” the report notes.
In the banking sector, meanwhile, most loans went to wholesale and retail (28 percent), construction and real estate (16 percent), agriculture, forestry and fisheries (9.4 percent), and households (17 percent).
“Banks and MFIs have expanded their services and networks in the capital and in provincial towns and cities to respond to the daily needs of customers,” the report says.
“The progress of financial technology and an increase in its demand have pushed the bank and microfinance institutions 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 notes that the average capital adequacy ratio was 21 percent for banks and 25 percent for MFIs, much higher than the minimum rate required, 15 percent.
The liquidity ratio was also higher than the 80 percent required, reaching an average of 168 percent in the banking industry and 188 percent in the MFI sector.
NBC’s director-general Chea Serey said the banking and MFI sectors continue to be one of the main drivers of national economic growth.
However, she pointed out that the non-performing loan (NPL) ratio in agriculture rose in 2018 due to natural disasters. NPLs reached 8.2 percent of total loans last year, higher than other sectors like manufacturing (4.1 percent), construction (4.2 percent), and trading (3.2 percent).
Kea Borann, chairman of the Cambodia Microfinance Association (CMA), said the MFI sector grew by more than 20 percent last year, while NPLs decreased by two percent compared to 2017.
“I believe that, in the first quarter of 2019, the MFI sector will continue to grow, with loan and deposit portfolios achieving similar growth than in 2018,” Mr Borann said.
“However, we are still concerned about a lack of knowledge on the proper use of loans and are working to raise awareness on how to use loans efficiently,” he said.
Mr Borann said MFIs are now aiming to diversify their loan portfolios into other sectors, including commerce, service, and hospitality, but added that agriculture remains a priority.
Cambodia now has 43 commercial banks, 14 specialised banks, 7 MDIs, 73 MFIs and 273 rural credit institutions.