NBC: Banks and MFIs on Steady Ground

NBC: Banks and MFIs on Steady Ground

The financial sector is proving resilient even as the Coronavirus pandemic threatens the pace of economic growth. Commercial bank deposits rose by 20.7 percent in the first six months of the year, compared with the first half of 2020.

Consumer loans increased by 23.4 percent and customer deposits by 20.7 percent compared with a year earlier, according to figures from the National Bank of Cambodia (NBC).

While the central bank says the data confirms the strength of the banking system, it says it still needs to take precautions to maintain the resilience of the financial sector, given the uncertain economic situation.

Cambodia’s economy is forecast to grow 4 percent this year after shrinking 3.1 percent in 2020, according to the World Bank.

NBC Governor Chea Chanto said while the central bank is prepared to use appropriate monetary policy to support economic growth, financial institutions must continue to manage risk and develop hedging plans, while keeping an eye on the global economic and financial situation.

Chanto said the central bank has taken steps to provide liquidity to the banking system and monitors it regularly to avoid risk.

Cambodia’s economy continued to be hit by the spread of Covid-19 in the first half of the year, Chanto said, affecting key sectors such as tourism, manufacturing and construction. However, he said the agricultural sector continued to make good progress.

NBC’s semi-annual report also gave an analysis of Cambodia’s microfinance sector, which saw assets increase by more than 14 percent to nearly $9 billion in the first half of 2021. Loans to low-income borrowers rose by 19.3 percent to $7.6 billion. Loans to households made up nearly 28 percent of the total, agricultural loans added up to nearly 25 percent with trade and commerce at just over 20 percent.

Microfinance deposits rose by more than 19 percent to nearly $4 billion.

Liquidity at microfinance institutions (MFIs) that take a deposit rose by nearly 176 percent in the first half, compared with a 160 percent rise in the banking sector. Non-performing loans were low, at 2.4 percent for banks and 2.0 percent for microfinance lenders.

Microfinance aims to provide loans to unemployed or low-earning individuals and groups who are unable to borrow from regular banks, with the aim of making them financially self-sufficient. Loans can be as small as $100 or as high as several thousand dollars.

Source: Khmer Times