Cambodian households must increase private savings to assist opportunities for domestic investment according to the World Bank as Cambodia Microfinance Sector continues to implement its savings agenda.
According to a recent World Bank report, private savings must increase to allow for more domestic investment and reduce the heavy reliance on foreign lending and investment.
In the report it found, Cambodia’s low domestic investment reflects the country’s low savings rate. Cambodia’s gross national savings rate was 11.5 percent of GDP in 2018, the lowest among comparator countries.
Moreover, the savings rate has declined since a peak in 2012 of 22.9 percent. Even more concerning is Cambodia’s low and declining gross private savings rate in recent years, in place of large and growing government savings, they added.
In 2018, government savings accounted for more than half of Cambodia’s total savings, compared to 2010 when it made up less than 4 percent.
Promoting higher savings to support domestically-financed private, productive investment will be critical to sustaining the rapid expansion of fixed capital formation required to meet Cambodia’s growth targets. Higher savings would also support greater macroeconomic stability for long-term growth.
This is even more critical today, where the massive disruption in the international credit market brought on by the Covid-19 pandemic will likely threaten investment activity for years to come, the World Bank said.
CMA implements its household savings agenda
Speaking to Cambodia Investment Review in response Cambodia Microfinance Association (CMA) spokesperson Tongngy Kaing said instilling savings culture is among the main topics of CMA’s efforts to promote financial literacy in the kingdom where TV shows, radio spots, online campaigns, workshops are conducted annually.
He added, Cambodia currently has an event called ASEAN Saving Day which is hosted at the end of October to encourage more saving via workshops, online campaigns and other activities.
“The CMA realizes that financial literacy is not a one-off work but an ongoing effort that needs collaboration from stakeholders. Not only does CMA do its own activities, it has also coordinated lenders, private companies, civil society organizations and regulators to help build good saving habits among ordinary people,” Tongngy said.
Cambodia Investment Review had previously reported that the National Bank of Cambodia banned any new deposit-taking institutions allowed in Cambodia.
By the end of 2021, only 6 of the 80 MFIs in Cambodia have a license to take a deposit. They are known as Microfinance Deposit-taking Institutions that have received $4 billion from 2.8 million accounts/clients. The whole banking and finance sector have received USD 38 billion from 12 million accounts.
To attract more savings, CMA members have introduced innovative, attractive and high-interest rate saving products. It should be noted that Cambodia is among the top high-interest rate for a deposit while it is common for most MFIs to provide 7 percent per annum interest rate for deposits or savings.