Cambodia: NBC outlines 2021 risks for personal debt growth

The National Bank of Cambodia (NBC) said declines in personal income and savings in 2020 pose the primary risk for a potential increase in personal debt in the Kingdom in 2021, according to its Macroeconomic and Banking Sector Update 2020 report.

Consumer loan balances, as of September 2020, stood at $9.11 billion, according to Credit Bureau Cambodia. By category the split was roughly 51.51 percent in mortgages, 47.90 percent in personal finance and 0.58 percent in credit cards balances. Data from the banking and finance sector shows that close to 270,000 loan accounts totalling $3.7 billion had been restructured as of September 2020.

In Channy, president of the Association of Banks in Cambodia (ABC) and president and group managing director of ACLEDA Bank, noted that with that in mind, the banking and finance sector has stepped up the introduction and adoption of financial technologies in order to reduce their operational costs and use those savings to protect users from additional expenses.

Channy pointed out that as a market leader in the financial sector, expenses, production costs, benefits and risk are always a concern. He added: “When we are concerned about a risk, such as a decline in our customers’ incomes, then we try to introduce something that will reduce their banking costs as an adjustment to a hard-hit situation.”

He added the many measures were introduced by the government in 2020 to support and rehabilitate the economy. Those measures helped the banking sector support their customers in providing more credit to them.

Channy also noted that the extension of loan restructuring to mid-2021 was another positive step by the government and the NBC as it enabled the sector to continue supporting its customers.  He added that ACLEDA bank currently has restructured $150 million in loans.

PRASAC’s Executive Vice-President and Chief Marketing Officer Say Sony said earlier that as of September 2020, PRASAC’s loan portfolio stood at $2.862 billion, an increase of 14.43 percent compared with 2019 figures.  Their loan portfolio mixture was 64.31 percent in business loans with the remaining 35.69 percent being personal loans.

“People took on personal loans for a number of purposes. Among them being home improvement, real estate, automotive, green-driven purchases and emergency loans among others. However, as of September 2020, the demand for business loans was more robust than the demand for personal loans. The portfolio quality of personal loans performed better than business loans,” Sony said.

Regarding the risks and concerns issues about personal debt, the NBC said it continues to strengthen the supervision of the banking sector and has prepared to issue any prudent measures and other supports necessary to maintain the sustainability, resilience and level of trust in Cambodia’s banking sector.

It added that the banking system continues to provide credit responsibly, to raise awareness of financial literacy and to ensure inclusion to the public, while strengthening consumer protection and boosting the quality and transparency of the credit information-sharing system. These factors will contribute to the maintenance of financial stability and the avoidance of over-indebtedness among people.

NBC added that the banking and finance sector continues to play a key role in supporting the country’s economic activities as well as contributing to the maintenance of sound macroeconomic and finance principles.

The central bank added it projects the country’s economic growth in 2021 will reach 4 percent, should the efficacy of the COVID-19 vaccines and their distribution prove to be successful over the first half of this year. It added that a recovery of the economy in 2021 would reduce pressure on the banking sector, enabling it to increase available credit and to collect deposits at a higher rate than in 2020.

NBC added that the continued strengthening of domestic economic activities will support and mitigate the impact on Cambodia’s economy caused by the slowdown in external exports. It added the implementation of government policy to promote the development of small and medium enterprises and to boost innovation and the use of technology in all sectors will be significant in strengthening local-based growth activities.