Cambodia Investment Review
Cambodia’s consumer finance debt has hit $15.01 billion for the first time according to the 2023 fourth quarter data report released by the Credit Bureau of Cambodia (CBC). The same period also reported a 9.7% increase in 30+ day late payments shedding light on emerging challenges in the consumer finance sector.
The figures indicate a much slower yet continued demand for consumer credit, encompassing personal loans, mortgages, and credit cards. The final quarter of 2023 (Q4) witnessed a 5 percent increase in loan applications compared to the third quarter, with total consumer loan accounts climbing to 1.76 million. Remarkably, this period marked the highest increase in consumer loan accounts over the last five quarters, peaking at 4.49 percent, a significant rise from the 1.78 percent recorded in Q3, 2023.
Potential Vulnerabilities In The Financial Health Of Consumers
The composition of these loans reflects the consumer behavior and preferences in the Cambodian market. A substantial 80.27 percent of these accounts were for personal finance, followed by mortgages at 11.53 percent, and credit cards at 8.20 percent. Notably, the mortgage category claims the lion’s share of the total consumer loans disbursed, accounting for 54.42 percent, with personal finance trailing closely at 44.44 percent. Credit cards, though vital, represented the smallest segment, constituting only 1.14 percent.
However, this growth in consumer lending has not been without its challenges. The 30+ DPD (more than 30 days overdue) ratio, a key indicator of credit quality and default risk, has risen by 5.14 percent. This uptick points to a marginal deterioration in credit quality, signaling potential vulnerabilities in the financial health of consumers. The personal finance category exhibited the most significant strain, recording the highest delinquency rate at 6.54 percent, followed by credit cards at 5.38 percent and mortgages at 3.99 percent.
The CBC report also highlighted the structure of these loans, revealing that single accounts or relationships with financial institutions dominated the landscape, making up 70.07 percent of the loans, while multiple account relationships accounted for the remaining 29.93 percent.
Governments Proactive Approach To Addressing The Financial Challenges
Speaking at the recent 2024 IBC Outlook Sothearoath Oeur CEO of CBC highlighted the bureau’s commitment to supporting key economic sectors, as evidenced by the restructuring allowances for the tourism and construction sectors. These measures are indicative of the CBC’s proactive approach to addressing the financial challenges posed by the global economic environment. Sothearoath stated, “Our strategic decisions are aimed at fostering a resilient economic climate that can weather global financial uncertainties.”
The CBC also shed light on the challenges and opportunities within the sector. Among the challenges are the disruptive forces that continue to stress the financial ecosystem, alongside the growing pains associated with deposit expansion. On the flip side, opportunities for improving operational efficiency and enhancing customer digital experiences were identified as critical areas for future development.
In response to these challenges, the CBC has been an advocate for digital transformation within the sector. “As we navigate through these challenges, our focus is to leverage technology to streamline operations and provide a seamless digital experience for customers. This is not just an opportunity but a necessity in the evolving financial landscape,” Sothearoath remarked.