National Bank of Cambodia governor Chea Serey (centre) and representatives from Cambodian financial institutions at the press conference on October 8. FN
Representatives from banks and microfinance institutions have expressed their commitment to restructuring loans for customers facing financial difficulties, as the number and volume of such requests continue to rise.
At an October 8 press conference, the National Bank of Cambodia (NBC), the Association of Banks in Cambodia (ABC) and the Cambodia Microfinance Association (CMA), along with representatives from ABA Bank, ACLEDA Bank, LOLC and Maybank affirmed their willingness to continue restructuring loans to assist customers struggling due to declining incomes.
These financial institutions emphasised that debt reorganisation does not affect customers’ credit history or harm their records with Credit Bureau Cambodia (CBC). Additionally, they noted that data on restructured loans is only kept for 12 months.
Additionally, representatives from the banks clarified that a CBC report is just one factor considered in approving future loan approvals. Banks also assess the borrower’s actual circumstances, particularly their repayment ability.
The bank representatives acknowledged that restructuring clients’ debt impacts the cash flow of some banks, but the NBC has alleviated this issue by easing certain reserve requirements, such as lowering the ratio to 7%.
The practice of loan restructuring has been in place since 2020 in Cambodia, when the Covid-19 pandemic affected the livelihoods and businesses of citizens.
Restructuring can take various forms, such as postponing principal payments, reducing the amount of principal owed, lowering interest rates, reducing or waiving collateral and offering other concessions.
CBC CEO Oeur Sothearoath stated that since 2020, nearly one million customers have had their loans restructured, with a debt totalling over $10 billion. He noted that $4 billion of these loans have been fully repaid by customers.
He added that in the first eight months of 2024, the total amount of restructured loans reached $1.4 billion, surpassing the $1.2 billion for all of 2023. He expects this number to grow following the implementation of new guidelines in September.
In late August, the NBC issued a new framework for debt restructuring by easing financial requirements. These new measures will be in effect from September 2024 until the end of 2025.
Experts in the banking sector noted that allowing restructuring benefits both lending institutions and borrowers in difficulty, as well as supporting the national economy as a whole.
Sectors currently facing significant challenges include tourism, real estate, construction and small businesses, all of which are closely tied to citizens' daily livelihoods. Without loan restructuring, the economic impact could be even greater.
Why is loan restructuring increasing despite economic growth?
The government has projected that the country’s economy will grow by 6.6% in 2024 and return to pre-Covid-19 growth levels of around 7% by 2028.
The World Bank forecasts the country’s economy will grow by 5.8% in 2024 and 6.1% in 2025, aligning closely with projections from the Asian Development Bank (ADB), which predicts growth of 5.8% and 6%, respectively.
NBC governor Chea Serey explained that although the country’s economy is gradually recovering, the effects of this growth are reaching citizens at a slower pace. She noted that it takes time for macroeconomic improvements to trickle down to the micro level.
Bank representatives also highlighted that the increase in loan restructuring shows the capability of these institutions to implement the NBC’s guidelines, allowing for swift loan adjustments.
Hong Vanak, an economist at the Royal Academy of Cambodia, stated that although loan restructuring has been allowed since 2020, actual implementation may have been slow due to the novelty of the procedure or delays in processing applications.
He also mentioned that the rise in restructuring requests reflects the ongoing financial challenges faced by borrowers, who continue to suffer indirect effects from the Russia-Ukraine war, the conflict in the Middle East and the lingering impact of Covid-19.
Vanak concluded that loan restructuring helps customers “breathe easier”.
