People stand at the counters of a bank in Phnom Penh in 2019. Heng Chivoan
Local private bankers have affirmed that deposits from investors and general clients have been on an upward trend for at least the last quarter, in line with National Bank of Cambodia (NBC) deputy governor Chea Serey’s overall forecast made based on the perceived stability of the financial sector and socio-political conditions on the whole.
This comes amid an unfolding global banking crisis – said to have started with the collapse of Silicon Valley Bank (SVB) and Signature Bank in the US – that has gripped the entire sector.
One such banker is In Channy, president and group managing director of public-listed ACLEDA Bank Plc, who said deposits at his commercial bank have grown an average of $100 million a month from $6.2 billion at end-2022 to over $6.5 billion at present.
“The main factor leading to such rapid growth in deposits is the high degree of confidence that investors as well as the general public place in the political and socio-economic stability in the country.
“As I see it, only in Cambodia can we guarantee [stability in] these three [aspects]. That’s why investors, including the public, have trust. And when they have trust, they’ll make use of the [financial] system, which can manage and administer their resources,” he said.
The general consensus is that the local financial industry currently has enough sources of funds to support those in need of loans.
Sok Voeun, CEO of LOLC (Cambodia) Plc, a Sri Lankan-owned microfinance deposit-taking institution (MDI) with a corporate bond listed on the local bourse, commented that loans need to be issued commensurate with increases in deposits, lest interest payments to depositors eat away at profit margins.
Voeun, who is also Cambodia Microfinance Association (CMA) chairman, also acknowledged the rise in deposits at banks and microfinance institutions (MFI).
Cathay United Bank (Cambodia) Corp Ltd recently announced a rate hike of 0.5 percentage points to annual interest rates for existing loans, in a move met with considerable dissatisfaction.
But the NBC’s Serey rationalised the decision, noting in a statement that market forces are driving interest rates higher internationally, affecting Cambodian banks as well – many of which depend on foreign lenders for capital.
This has translated into higher deposit interest rates as well, “at almost every bank”, she said. “Depositors want high interest rates, while borrowers want low interest rates. So some banks have decided to raise interest rates on their customers’ loans.”
“The question is: is this wrong, or right?” she asked rhetorically, stressing that a definitive judgement must rest on whether the loan agreement stipulates a floating or fixed interest rate. In the event of the latter, the bank has to negotiate with the borrower before the rate is adjusted or other contract terms are changed.
One is advised to read through contracts carefully before signing and to make sure to understand contractual rights and obligations to avoid disputes.
On the other hand, according to regulations, financial institutions are obliged to clarify customers’ concerns and present all contract terms and conditions in an honest and transparent manner.
For reference, in its 2022 annual report, the NBC indicated that Cambodia’s formal “banking” system comprised 59 commercial banks; nine specialised banks; five MDIs; 82 non-deposit-taking MFIs; 224 rural credit institutions; 16 financial leasing companies; five third-party processors; 34 payment service providers; one credit information sharing service provider; six foreign bank representative offices; and 2,869 money exchange businesses.
The Kingdom’s five MDIs were: Amret Plc, AMK Microfinance Institution Plc, PRASAC Microfinance Institution Plc, LOLC (Cambodia) Plc, and Mohanokor Microfinance Institution Plc.
