Cambodia Investment Review

Financial institutions remain significant source of capital for improving people’s livelihoods: Association

Financial institutions remain significant source of capital for improving people’s livelihoods: Association

Sam Oudom

Cambodia’s banking and microfinance sector is continuing to strengthen economic growth and reduce poverty in Cambodia, according to leading figures in the sector.

Over the past three decades, financial institutions have expanded significantly to provide financial transactions for their clients by providing new technologies. There is also the provision of capital to companies and citizens to launch or expand businesses at low and secure interest rates, they added.

In Channy, Chairman of the Association of Banks in Cambodia (ABC) and CEO of ACLEDA Bank told the Cambodia Investment Review that the banking sector has been supporting the economic development and improving the daily lives of Cambodians for almost 30 years. The work of the banking sector is to improve the living standards of the people, reduce poverty and provide a source of capital for business and social development.

“In Cambodia, the banking sector has been growing steadily,” he said. Along with the growth of this banking institution, we observed that the banking sector has provided capital or credit to the people in large quantities according to the needs of the people and we do this to assist strengthen and enhance the progress of the people.

The banking sector also offers high-interest rates for customers who come to deposit and offers the lowest interest rates for customers who come to take out loans to expand their business, he added.

The Chairman of the ABC said: “The banking sector has increased its capital every year to make it possible to provide capital to people in need and quickly. As for security, the banking sector has ensured both the quality and safety of cash transactions. “

According to In Channy, the banking sector will continue to work with the government to reduce the poverty of the Cambodian people through the provision of new financial and technological.

Signing Agreement between ACLEDA Bank Plc. and Garment Manufacturers  Association in Cambodia (GMAC) on Payroll Service
In Channy, Chairman of the Association of Banks of Cambodia and CEO of ACLEDA Bank.

Not unlike the banking sector representative, Kaing Tongngy, spokesman for the Cambodia Microfinance Association (CMA), said that the role of the microfinance sector is the lifeblood national economy. He said that the microfinance sector has provided capital for people to use and expand their businesses.

A spokesman for the CMA said that what the microfinance sector has contributed to the daily lives of the people in the collection of cash into the microfinance system. This cash collection is done by mobilizing people who have a lot of cash to deposit in microfinance. So, microfinance can transfers the deposit to customers in need as a credit.

“Our microfinance has played a role in accepting cash from customers as a deposit to allow us to turn this money into credit for customers in need,” he said. Customers who deposit will get a reasonable interest rate about 5 to7% per years, which increases the size of their budget. This means that customers who deposit also benefitted, customers who receive credit also benefit.”

“In the past, when there was no microfinance or banking sector, people who needed cash to make a living or run a business had no choice but to borrow money from their neighbors or the private sector,” he said. We have known that the private sector does not have the right mechanisms to protect borrowers and interest rates can be between 15% and 20%, and the size of loan cannot be given in large quantities.”

In recent years, MFIs have expanded their services to more provinces in Cambodia. The increasing presence of microfinance institutions in rural areas has made it clear that the microfinance sector is making a significant contribution and providing convenience to people in rural areas who are financially deficient, according to Tongngy.

The report by the National Bank of Cambodia (NBC), in 2021, Cambodia has more than 54 commercial banks, 10 specialized banks, 6 microfinance institutions accepting deposits from the public, 6 non-deposit microfinance institutions, 79 rural credit institutions, 234 financial leasing companies, 28 payment service providers, 1 credit information sharing service provider, 6 foreign bank representative offices and 2,447 money exchange businesses.

Of which, assets in the banking sector in 2021 grew by 16%, or $ 68.2 billion while Deposits and loans surged by 15.4%. The microfinance sector, which has played an active role in reducing poverty, had total assets of 17% or $ 9.8 billion, and loans raised by more than 20.2% or $ 4.3 billion in 2021.

Increasing financial knowledge of Cambodians

When it comes to financial literacy, it refers to income and expenditure management, savings, debt management, financial planning, and so on. According to Kaing Tongngy, financial literacy is very useful for people’s daily lives, because when people have better financial knowledge, the cost and the income related to finance will be orderly as well as lift people out of poverty.

At this point, Tongngy wants to point out that the financial knowledge of the Cambodian people is growing a lot. However, despite the steady progress, compared to other countries in the region, Cambodia is still low in financial literacy.

“Every year, our microfinance association expend huge of budget to train financial literacy for our citizens, such as launching promotional campaigns, media partnerships, as well as direct workshops with customers and civil society organizations,” he said. “We are cooperating with relevant partners, both national, international, and civil society to join hands to provide more financial knowledge of citizens and grow,” he added.

Kaing Tongngy, spokesman for the Cambodia Microfinance Association.

USAID’s report shows that about 80% of Cambodians live in rural areas and about 65% of them are engaged in agriculture, fishing, and forestry. The same report said that most people in rural areas still do not know about financial literacy.

Kao Thach, executive director of the Agricultural and Rural Development Bank, said that Cambodian people who living in rural areas still had low levels of knowledge related to financial management.

“We have contributed a lot to the economic development of the Cambodian people, especially the agricultural population in rural areas. We have raised a lot of money to support their business, as well as provide some techniques and materials for the agricultural sector, he said. “We also provide market information and set goals for farmers to become farmers with a high level of financial literacy.”

However, he emphasized that financial literacy will take about 5 to 10 years so that all Cambodians can understand how to save money, spend money on purpose and manage the budget during any risk.

According to the report by the Asian Development Bank, Cambodia ranks 135 out of 140 countries with a low level of financial literacy.

Improving livelihoods in the COVID-19 crisis

In a pandemic, the banking and microfinance sector remained resilient and robust, as well as sufficient capacity to meet financing needs and sustain economic and social activity. The restructuring of loans and reserves of banking and microfinance institutions amounted to 370,785 accounts, equivalent to 5.5 billion dollars, which contributed to alleviating the burden of people and companies – enterprises that have been severely affected by pandemics for almost two years.

Tongngy, the spokesman of CMA, said that microfinance institutions were still standing up to lending to the affected people, even though microfinance were also facing the personal issue.

“The pandemic did not affect only the lives of the people, but microfinance institutions are also badly affected. We didn’t complain about it. To address this, we have mobilized resources to help ourselves and our people in need during the crisis, “Tongngy said.

No photo description available.
Executive director of the Agricultural and Rural Development Bank.

“We have helped a lot of people financially,” he said. “We have redesigned mechanisms such as credit arrangements to help ease customer cash pressures, enabling them to repay in the suitable amount and without penalty. In 2021, our microfinance sector decided to be interest-free for two months and suspend payments for up to three months. In particular, the families of clients who died of Covid-19, we have reduced their debt to some extent.

In Channy, CEO of ACLEDA Bank affirmed that the banking institution remains committed to disbursing more cash to customers to help improve the lives of people affected in all forms during the Covid-19. He said that If people’s livelihoods improve, so does economic growth.

“As a banking institution, we continue to support, lend and educate more people,” he said. In this crisis, the banking sector has also launched Cash App and E-payment through technology to modernize the people. We want to see the growth of the Cambodian people through the use of cash with this modern technology as well.”

Recently, the E-payment system is widely utilizing such Bank app, Bakong, Retell Pay system, Cambodia Share-switch system, and QR Cod scanning system for cash payments.

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