Cambodia Investment Review
The Credit Bureau Cambodia (CBC) has released its Small Business Credit Index Report for the second quarter of 2024, revealing a complex landscape of mixed performance across various credit metrics. While the overall number of loan accounts saw a decline, the total loan balance experienced modest growth, highlighting the nuanced credit environment for small businesses in Cambodia.
Small Business Loans Hit $34.22 Billion
The total number of small business loan accounts decreased by 1.7%, bringing the total to approximately 1.86 million accounts by the end of the quarter. Despite this contraction in loan accounts, the outstanding balance for small business loans recorded a slight increase of 0.1%, reaching $34.22 billion. This indicates that while fewer businesses are taking on new loans, the size of the existing loans has grown.
“The demand for Small Business Credit decreased in terms of the number and amount of applications, and Small Business Credit performance was negative in the number of loan accounts,” said Mr. Oeur Sothearoath, CEO of CBC. “However, we did see a slight increase in the loan balance, which suggests that the businesses that are taking on debt are doing so at a higher level.”
Sustained Interest In Financing For Agricultural Activities
One of the most significant findings in the report was the decline in Small Business Credit Applications, which fell by 7.0% overall compared to the previous quarter. This drop was driven by notable decreases across several categories: Working Capital Applications fell by 11.0%, Asset Finance Applications by 9.0%, and Construction Applications by a substantial 14.2%. In contrast, Agriculture Applications bucked the trend with a 2.7% increase, indicating a sustained interest in financing for agricultural activities.
Regionally, the Coastal region saw the largest decreases in both Working Capital and Asset Finance Applications, with declines of 12.9% and 13.2%, respectively. The Plateau region experienced a dramatic 65.5% drop in Construction Applications, although it also saw a significant 23.2% increase in Agriculture Applications.
Overdue Repayments Increased To 8.3%
In terms of credit quality, the report highlighted a slight deterioration. The 30+ Days Past Due (30+ DPD) ratio, which measures the percentage of loan accounts with repayments overdue by 30 days or more, increased to 8.3% in Q2 2024, up from 7.8% in the previous quarter. This uptick in delinquency was most pronounced in the Construction sector, where the 30+ DPD ratio reached 15.3%. Regionally, the Coastal, Tonle Sap, and Plateau areas saw the highest increases in delinquency rates, reflecting growing challenges in these regions.
Despite these challenges, a significant portion of small business customers (56.8%) remained loyal to a single financial institution, and 38.1% of customers held only one loan account. The rest of the customer base showed a more diversified approach, with 43.2% maintaining relationships with multiple financial institutions and a notable 7.7% holding more than three loan accounts.
“The increase in the 30+ DPD ratio is a concern, as it suggests that more small businesses are struggling to meet their repayment obligations,” noted Mr. Sothearoath. “This could be indicative of broader economic challenges facing the sector, particularly in regions where we have seen the highest increases in delinquency.”
The CBC, established in 2012, is a key player in Cambodia’s financial infrastructure, providing critical credit information and analytical solutions to banks, microfinance institutions, and other credit operators. By offering accurate, real-time data, CBC aims to enhance financial stability in the country by helping businesses manage credit risk and make informed decisions.
