Cambodia Investment Review
At the Association of Banks in Cambodia’s (ABC) Annual General Meeting (AGM) held on April 24, 2025, at Oakwood Premier Phnom Penh, Mr. Rath Sophoan, Chairman of the ABC, outlined a comprehensive overview of the banking sector’s performance, highlighting both challenges and positive developments amid an uncertain global economic backdrop.
Global Economic Pressures Weigh on Cambodia’s Outlook
The global economy in 2024 grappled with slower growth, influenced by persistent geopolitical instability, the lingering effects of the COVID-19 pandemic, and rising protectionist measures. Cambodia, like many other emerging economies, was not immune to these external pressures. Despite these global economic headwinds, the Kingdom’s economy showed resilience, recording a growth of 5.9% in 2024.
Key drivers included strong export performance, a recovering tourism sector, and robust foreign direct investment (FDI) inflows. Inflation remained under control, below 1%, while the exchange rate remained stable.
However, the specter of ongoing U.S. tariffs targeting Cambodian exports has created a level of uncertainty, potentially impacting the sector’s growth trajectory in 2025. This concern was echoed by Mr. Rath Sophoan, who noted that these global shifts could undermine the banking sector’s ability to sustain its growth momentum.
Banking Sector’s Mixed Performance
While Cambodia’s banking sector remains stable, the industry is not without its challenges. Total assets grew by 7%, reaching a significant $90 billion. However, credit growth lagged at just 3%, with loans still heavily concentrated in sectors such as retail trade, real estate, construction, and agriculture—sectors that represent over 75% of total loans. This slow credit growth, coupled with rising non-performing loans (NPLs), remains a critical concern. As of February 2025, NPLs stood at 6.10%, while loans more than 30 days overdue accounted for 7.87% of the total, highlighting ongoing struggles with asset quality.
On a positive note, deposits rose by 16.3%, indicating strong public confidence in the banking sector, as well as increased digital adoption. These developments have strengthened the sector’s loan-to-deposit ratio and CASA ratio, pointing to a healthy liquidity position despite slower credit expansion.
Key Initiatives and Collaborative Efforts
During the AGM, Mr. Rath Sophoan provided updates on several key initiatives undertaken by the ABC to address industry challenges. Notably, the ABC has worked closely with the National Bank of Cambodia (NBC) and various government ministries to enhance collaboration in critical areas such as cybersecurity, digital transformation, and consumer protection.
The ABC’s participation in the Cybersecurity Day in May 2024 underscores its commitment to safeguarding the banking industry and its customers from rising cyber threats. The Council also engaged with the Ministry of Post and Telecommunications to discuss cloud technology regulations and data privacy, reflecting the sector’s growing focus on adapting to digital advancements.
Additionally, the ABC Council continues to engage in discussions with key government figures, including the Ministry of Justice and the General Department of Taxation, to enhance regulatory frameworks and promote stronger industry collaboration. These efforts are vital in maintaining the stability of the sector as it navigates evolving challenges.
Challenges and Opportunities Ahead
Looking ahead, Cambodia’s banking sector faces several pressing challenges. The ongoing U.S. tariff disputes and the potential de-coupling of the U.S. and China economies pose risks to global trade and economic stability. Furthermore, geopolitical tensions, supply chain disruptions, and the re-emergence of protectionism could dampen the region’s growth prospects.
However, opportunities abound, particularly in the Cambodian government’s strategic push for modernization through the 2024-2028 Action Plan. The government’s focus on public infrastructure investment, economic diversification, and reforms in public administration could provide a solid foundation for future growth. Additionally, Cambodia’s healthy liquidity position and the continued emphasis on financial inclusion and corporate governance within the banking sector are expected to contribute to long-term resilience.
Looking Forward: Strengthening the Sector for 2025 and Beyond
The ABC’s 2025 agenda includes a continued focus on improving corporate governance, fostering a culture of continuous learning, and promoting responsible banking practices. Mr. Rath Sophoan emphasized the importance of maintaining a collaborative banking ecosystem to ensure that the sector continues to contribute to Cambodia’s economic growth and prosperity.
With ongoing challenges from global uncertainties and domestic regulatory changes, the ABC remains committed to navigating these complexities while advocating for a secure, efficient, and sustainable banking environment.
