Children play near a branch of PRASAC Microfinance Institution Plc in the capital’s Boeung Keng Kang III district on September 4, 2016. Heng Chivoan
Deposits in Cambodia’s five microfinance deposit-taking institutions (MDI) totalled $4.7 billion as of September 30, across 2.6 million accounts, marking a massive “more-than-22” per cent year-on-year rise in terms of value, which insiders say reflects growing public understanding, interest and confidence in the Kingdom’s financial system.
These figures were disclosed in a report by the Cambodia Microfinance Association (CMA) – the Kingdom’s apex microfinance industry body – obtained by The Post on October 30.
CMA chairman Sok Voeun credited the swelling MDI deposits to the innovative and convenient services available for clients.
“This increase reflects the efforts of licensed institutions to publicise the importance of saving money to the public.
“In addition, all MDIs are now striving to modernise their use of technology to provide their customers with new and easier banking services, such as digital payments. At the same time, we offer interest rates that can exceed a commercial bank for fixed deposit, which is an [attractive option] that allows MDIs to receive more deposits.
“I encourage the general public to continue and increase … saving habits, especially with official financial institutions, to reap the benefits as well as avoid the risks,” he told The Post on October 30.
Royal Academy of Cambodia economics researcher Ky Sereyvath attributed the surge in MDI deposits to a generally better public understanding of the current structure of the financial system, adding that steady, continued economic growth has driven people to save more.
“The increase in institutional deposits reflects the growing public confidence in the financial system, and also the perception that the [Covid-19-induced slowdown] in the economy has made people more cautious about spending,” he said.
He called on microfinance institutions (MFI) to focus on encouraging local savings, as opposed to merely raising capital from external sources.
Highlighting the microfinance sector’s heavy reliance on foreign financing, Sereyvath claimed that external sources account for “10 times” as much capital in MFIs as domestic counterparts.
On December 6, 2021, the National Bank of Cambodia (NBC) issued a notice on its decision to stop issuing new business licences to MDI and to encourage mergers among existing financial institutions “to improve the provision of quality, efficient and affordable financial services for companies, enterprises and the public”.
The notice remarked that the Kingdom’s banking and financial institutions are “proudly growing” in quality, size and scope.
The central bank explained that the move is meant to further strengthen the capacity of banking and financial institutions, as well as to monitor financial stability and contribute to economic development.
The CMA’s Sok Voeun expects MDI deposits at December 31 to be up 30 per cent over a year earlier, with the number of accounts rising in tandem.
“The increase in the number of accounts and the balance of deposits reflects the financial awareness of the people, especially the understanding of the importance of savings,” he said.
Citing an NBC report, Voeun said deposit accounts at the Kingdom’s financial and banking institutions reached 12.1 million as of December 31, 2021, with total deposit balance to the tune of $38.5 billion, up 15.4 per cent year-on-year.
For reference, the Kingdom’s five MDIs are: Amret Plc, AMK Microfinance Institution Plc, PRASAC Microfinance Institution Plc, LOLC (Cambodia) Plc, and Mohanokor Microfinance Institution Plc.
