International Monetary Fund (IMF) managing director Christine Lagarde has hailed Cambodia as an example in the increase of financial inclusion, one where fintech has been used to increase financial access to people who were previously unbanked.
Speaking to nearly 40 world leaders and other high-ranking officials at China’s second “Belt and Road Forum for International Cooperation” in Beijing on Friday, Lagarde raised Cambodia as an example of increased financial inclusion and said the model could be applied “everywhere”.
She added that a strong public-private partnership in supporting mobile finance has led to a tripling in the number of microfinance institutions (MFIs) since 2011. These have now provided loans to over two million new borrowers, representing nearly 20 per cent of the adult population.
“Many of these citizens had never had a bank account. Now they can save for the future and perhaps even start a business of their own,” she said. “These are ideas that can work everywhere. But countries have to be willing to partner and learn from each other.”
In the 2019 World Bank’s “Ease of Doing Business” rankings, the Kingdom ranked 22nd in the “Getting Credit” category despite receiving a very poor overall score, ranking 138th among 190 economies.
Cambodia has always positioned well in the “Getting Credit” category. The ranking has 10 categories altogether, including “Starting a Business”, “Getting Electricity”, “Getting Credit” and “Trading Across Borders”.
Aside from “Getting Credit”, the Kingdom ranked lower than 100th in the other categories.
Cambodia Microfinance Association (CMA) chairman Kea Borann on Wednesday said the Kingdom’s MFI sector has developed rapidly over the past 20 years, thanks to a large operation network of MFIs and the availability of new products and services to unbanked customers.
He added that the National Bank of Cambodia’s (NBC’s) proactive policies and its encouragement of MFIs was a key driver to the success, as NBC allows only seven MFIs to offer deposit products to unbanked customers.
The products enable them to save money in the formal sector. Other services, such as payment and mobile banking, are also on the rise.
While rising competition in the industry has provided benefits to customers including better services and lower interest rates, Borann said it has also pushed high-credit growth, which may be a worrisome trend for long-term sustainability.
“For better and long-term sustainability, we shall focus more on financial literacy, and at the same time on financial inclusion. If people have better knowledge about the uses of finance, it greatly reduces their risk of misusing money. It minimises risks to the financial sector,” he said.
Mekong Strategic Partners managing partner Stephen Higgins on Wednesday said there have been three key drivers in the remarkable progress that financial inclusion has seen in Cambodia over the past decade.
NBC has provided encouragement and a regulatory framework to support financial inclusion, large development finance institutions have helped develop a thriving MFI industry, while the launch of Wing mobile money and an electronic payments service provider has delivered low cost electronic remittances, he said.
“The ability to access the financial system in terms of being able to save money and transfer funds at very low cost has had a major positive impact for Cambodia. I’m less convinced that the level of debt being taken on by the poorer segment of the population is a good thing, and the ‘push’ or supply aspect of this needs to be looked at,” Higgins said.