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The central bank announces big jump in financial leasing credit

Sok Chan / Khmer Times Share:
The National Bank of Cambodia has reported that financial leasing credit has increased substantially. NBC

The National Bank of Cambodia (NBC) has reported that financial leasing credit has increased 42.6 percent to around $330.3 million with 110,479 accounts in the first half of 2020.

It said that for the first six months of the year, total assets in the financial leasing sector increased up to 40.5 percent, reaching $398.4 million. The NBC said that the main source of funds of the leasing credit providers is from investor’s fund, which increased up to 33.8 percent to $125.5 million.

NBC said in its semi-annual report in 2020 that financial leasing has contributed actively to provide services to customers throughout the country by providing the possibility of Cambodian people being to buy equipment serving their production and transportation needs and machinery and equipment related to agriculture and other daily consumption products.

Sok Voeun, microfinance institution (MFI) LOLC Cambodia chief executive officer, said that his institution saw his company’s leasing credit portfolio as largely stable but non-performing loans in the leasing sector have slightly increased.

He said in December 2019, LOLC had 41,000 clients with a leasing credit portfolio of $103 million. However, from January to June 2020, the leasing credit portfolio remained unchanged compared with December 2019. “Mostly the leasing products from LOLC consist of motorbikes, cars, tractors and three-wheelers,” Voeun added.

Marin Udom, Deputy General Manager of the agriculture equipment division of RMA Cambodia, which is providing the agriculture’s equipment, machinery and tractors under the brand of John Deere, said at present around 80 to 90 percent of the RMA’s customers are using loans from the banks and MFIs to get agricultural machinery, agriculture-related equipment and tractors from RMA, but now the banks and MFIs are being more strict about providing loans or are outright rejecting loan proposals, which affects sales.

Compared with the same period last year, our units sales dropped about 15 percent. The demand for agricultural equipment is still high even during this COVID-19 period, but there are challenges.

About 80 to 90 percent of farmers purchase this equipment with financial support and with the presence of COVID-19, most banks and MFIs are imposing more strict loan evaluation processes and higher deposits up from 40 to percent of the value of the purchase to reduce their risk.

Mar Amara, executive vice-president and group chief financial officer of ACLEDA Bank, said regarding the agriculture sector, the bank is lending up to more than 20 percent. She said the approved lending depends on the cash flow and a business assessment of each customer. “We are continuing to provide loans normally to the agriculture sector,” Amara added.

The banking system is stable because the banking and finance institutions have developed. Capital and liquidity in banking and MFIs are at a good level. The average of solvency ratio is 24.9 percent, according to the NBC.

It said that the solvency ratio of banking is 21.8 percent, while for MFIs it is a maximum 15 percent. The liquidity ratio is 145.2 percent for the banking sector and 158.5 percent for MFIs. Non-performing loans remain low at around 2.2 percent for the banking sector and 0.9 percent for the MFIs.

In the first half of 2020, the total assets of banking and financial institutions increased by 17.4 percent to $54.1 billion, credit increased 19.6 percent to $34.4 billion and deposits increased by $30.5 billion.

The Central Bank said it has put much effort into monitoring the health of the banking and financial institutions and the implementation of the law and regulations. As a result, the banking and financial sector is in a good condition.

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