A farmer gathers her harvest to sell at the market. Microfinance institutions are major providers of loans to the Kingdom’s agricultural sector. Supplied
Global economic uncertainties caused by geopolitical conflicts and wars continue to negatively affect Cambodia's financial situation.
Portfolios at risk above 30 days (PAR 30+) in the microfinance sector have increased by nearly 3% in the third quarter of the year compared to the fourth quarter of 2023. At the same time, restructuring loans have also increased.
“The PAR30 ratio is calculated by dividing the outstanding balance of all loans with arrears over 30 days by the outstanding gross loan portfolio,” explained a leading scientific journal. This means more than 8.5% of microfinance loans are at least 30 days in arrears.
A report from the Cambodia Microfinance Association (CMA) showed that in Q3 2024, the PAR 30+ in Cambodia’s microfinance sector rose from 5.9% in Q4 2023 to 8.7%.
Loan restructuring rose from 2% to 3.8%, while loan write-offs increased from 0.8% to 1.2%. In addition, credit growth was only 1%, rising from $5.103 billion to $5.153 billion.
The CMA added that as of August, the microfinance sector in Cambodia had total assets worth 25 trillion riel (about $6.2 billion), with loans to customers amounting to 21.3 trillion riel (about $5.2 billion) across 1.6 million loan accounts.
Dith Nita, CMA chairwoman, highlighted these challenges at the 2024 Annual Microfinance Conference on "Sustainable and Inclusive Microfinance: Current Situation and Future Trends of the Sector," held in Siem Reap on November 4.
She remarked that these issues could create financial strain on communities and financial institutions if solutions or careful management are not implemented.
Nita added that, in the past, the government and the National Bank of Cambodia (NBC) have provided regulatory incentives and adjustments, allowing institutions to offer loan restructuring to financially challenged clients. However, while this addresses short-term challenges, long-term sustainability requires maintaining adequate capital ratios, resilience and clear business plans.
“The CMA has been closely collaborating with the NBC, member institutions and other stakeholders to address these challenges. We aim to maintain sustainable growth in the sector with transparency, accountability and inclusiveness,” she said.
She emphasised that going forward, the CMA remains committed to upholding standards for customer protection, financial literacy and innovation.
The association will continue to strengthen sector practices, lending procedures and guidelines to ensure customer protection and transparency, with the goal of delivering safe, high-quality, user-friendly financial services to clients.
Sum Sannisith, NBC deputy-governor, noted that the growth of the microfinance sector has only been achieved thanks to the active involvement of all stakeholders.
He explained that the CMA has worked to enhance technological capabilities to ensure a secure and manageable microfinance system. Currently, the CMA is also working with the Cambodian Financial Intelligence Unit and relevant authorities to prevent criminals from using Cambodia’s microfinance system for money laundering or other criminal activities.
“I firmly believe that microfinance institutions and all stakeholders will continue their existing excellent cooperation and strengthen new collaborations to ensure a microfinance sector that is efficient, innovative and progressively developed, contributing to the national economy with sustainability and inclusivity,” he said.
According to the CMA, it currently has around 132 member institutions, with a total loan portfolio of approximately $5.11 billion, serving around 1.55 million customer accounts, 54% of them women.
Additionally, the four licensed deposit-taking institutions (LOLC, Mohanokor, Amret and AMK) collectively hold about $2.2 billion in deposits (a growth of 4.8%) from approximately 2 million depositors, 67% of whom are women.
