Buoyed by Cambodia’s strong gross domestic product of over seven per cent this year and next, the banking and financial sector is confident of enjoying strong growth in tandem with this. Data from the National Bank of Cambodia showed that total assets in the banking and microfinance sectors have increased by 19.2 per cent to $44.8 billion ending the second quarter of this year.

Credit in the sector increased 22.4 per cent – up to $27.7 billion – ending the second quarter of this year. Total outstanding loans to the banking sector was $21.5 billion while outstanding loans from microfinance institutions was $6.2 billion in the same period.

Phnom Penh Commercial Bank (PPCBank) president Shin Chang Moo sat down with The Phnom Penh Post’s May Kunmakara to discuss the performance of the economy and the banking sector for this year.

Q: What have you observed about Cambodia’s Economic Performance? What are your thoughts on the banking sector?

Shin: So far this year, the Cambodian economy has remained positive and the growth projection with over seven per cent is highly likely. Foreign Direct Investments (FDI) into Cambodia has stayed strong.

Furthermore, the gradual increase in FDIs from Korea and Japan offers a positive perspective on the Kingdom’s long-term growth. Growing domestic consumption and private sector investment are also key drivers of economic growth.

Overall, the banking sector seems to enjoy continuous growth in both credit and deposits thanks to sustained economic growth and an emerging middle-class.

Our recent survey indicated that the middle-class (with over $400 in household income) population has grown to 55% this year from 35% in 2016. Financing needs from those middle-class individuals and the corporate sector is getting stronger, thanks to purchases of housing and consumer goods. Capital investment is also growing faster.

PPCBank has maintained solid growth since 2016 when new shareholders took over the management. This year has also seen very good growth. The total loan volume of the bank is expected to grow by over 20% year-on-year growth by the end of this year. However, stronger growth in the SME and consumer sectors has been the most notable and positive change in our business portfolio.

Q: Currently, Cambodia might face some economic pressure if the EU withdraws the Everything But Arms (EBA) scheme. How will this impact banking activities and performance if it happens?

Shin: Since the EU is the biggest export market for Cambodia, EBA withdrawal, if it ever happens, would negatively impact the economy. Stumbling investment from China would also damage our economic growth. However, such risk potentials have been talked about for long enough that the banking sector is well prepared for any policy changes by the private and public sectors.

The NBC has been monitoring the banking sector’s credit exposure and it has enhanced the central banking functions to mitigate the risk of a credit crunch.

Many of the bigger banks have adjusted their portfolios to be more conservative to avoid a concentration of risk in any single sector.

PPCBank also prepared for such a credit crunch with contingency plans based on various scenarios to leverage on diversified funding sources and industry exposure. The impact of any particular risk would not be immediate and direct to just the banking sector, and this has enabled the private and public sectors to take preemptive measures.

In a way, as a long-term and fundamental view, we can consider it a good opportunity to improve the Kingdom’s global competitiveness. After all, Cambodia’s export cannot rely on EBA forever. It will eventually be withdrawn anyway. The government has increased the number of physical infrastructural projects such as roads, railway, power generation and more.

Fiscal expansion has a direct impact on promoting the domestic economy, and also improving competitiveness in the manufacturing environment. The recent promotion of the digital economy will also play a significant role of improving trading capacity in the domestic and international markets.

Q: Does your bank have any expansion plans for next year? If yes, then why did you make such a decision when the economic stress remains? What is your outlook for 2020?

Shin: As markets in both Phnom Penh and other urban areas grow faster, we will continue to increase our digital and physical channels. In March this year, we opened one branch in the Sen Sok area, which has been growing at high speed. We have been pleasantly surprised at how quickly our customer base grew in this new branch.

Today (Dec 23), we will open out Mao Tse Toung branch. On top of regular banking services, this branch features our Gold Club – VIP facility for private banking. We also have a China Desk, that will serve Mandarin speaking clients. Like in three of our other branches, the Mao Tse Toung branch will also have a coffee shop. Our partnership with Socials Coffee is part of our community commitment, Socials employs Cambodians with hearing difficulties.

On Friday, Dec 27, we will open the Heng Ly Market branch. A special feature of this branch is our first SME (small & medium enterprise) centre, which is a one-stop-shop where SME owners can get their financial needs being sorted out and obtain advise on taxation, registration and other matters that affect them. For this, we have partnered with already exiting parties, that have been playing their role in nurturing the SME capacity in the Kingdom.

Our digital channels, mobile app and corporate internet banking service will also be significantly upgraded. Our new core banking system will enable us to provide fast and integrated services to customers through digital and branch transactions.

PPCBank is committed to Cambodia’s ever-growing corporate and retail markets. As every industry or economy has cyclical trends, managing the downturn and investing for the upturn is our commitment and confidence to Cambodia’s economy