Thailand
KHR plays very important role in building a stronger Cambodian economy
Mr Sok Voeun, CMA’s Chairman, gave an insight into the Cambodia Microfinance Association in conjunction with the 43rd Anniversary of the Reintroduction of the Riel, Khmer Times. He elaborated on the importance of the KHR in the Cambodian economy and the usage of KHR up to 20 percent within the microfinance sector transactions
KT: Please enlighten us on the measures taken by CMA to ensure compliance of its members to meet the National Bank of Cambodia’s Riel percentage in terms of loans and how successful has it been? Have all its members attained the set parameters and are loans provided by CMA members, largely in Riels? What are the percentages?
Sok Voeun: CMA have been continuously joined with its members to encourage the usage of Khmer Riel (KHR) currency, and keep following up regularly as KHR plays a very important role in building a stronger economy, providing the kingdom with more independence and resilience, and benefiting the whole financial system.
CMA and its members have been among the most active supporters of Riel Day, an annual celebration aimed at promoting the use of the national currency. The association regularly conducts financial literacy campaigns to educate clients on the importance of KHR and empower them to make informed financial decisions.
So far, all members fulfill their requirement to meet national bank Riel percentage. These efforts have resulted in approximately 20 percent usage of KHR within the microfinance sector.
KT: What are the biggest challenges/impediments CMA members are facing in the above quest? What are NBC’s statutory requirements and set time frame, if this is applicable to CMAs?
Sok Voeun: Some CMA members have some challenges as clients need their loan in USD to buy assets and also their sources of income are in USD. However, those members are still able to meet the requirement. In addition, sometime there is challenge in raising Riel source of funds along with higher cost.
KT: Currently, interest rates on deposits, both in Riels and USD have been rocketing, thus increasing the cost of funds and congruously, hiking lending rates. What are your thoughts on this and the efforts taken by CMA to ensure that the free-market concept and policies do not put the CMA members in perilous positions with the increasing cost of USD?
Sok Voeun: Cost of fund from borrowing and deposit (both KHR and USD) have been increasing dramatically. However, we have not increased interest rates for existing clients as we use fixed interest rate contract. Anyway, for renew and new clients, we our charges are based on the market interest rate. Therefore, the increase of cost of funds will not have a big impact on CMA members.
KT: What measures would CMA take to ensure members’ ATMs, and CDMs CRMs accept only Riels in the country?
Sok Voeun: It does not sound right at the moment for CMA’s members’ ATMs and CDMs CRMs to accept only Riels. This is because the USD is still widely used in Cambodia’s economy, and many transactions are conducted in USD. However, CMA is committed to promoting the use of the Khmer Riel (KHR) in the microfinance sector and encouraging its members to continue to provide competitive interest rates for both loans and deposits in KHR. We also ensure that KHR is available in branches or through ATMs to encourage customers to use KHR whenever possible.
CMA is also actively involved in educating clients on the importance of KHR through regular financial literacy campaigns. We believe that by increasing financial literacy and awareness of the benefits of using KHR, we can encourage more people to use it in their transactions. We are also seeing a more connected banking system, such as Retail Pay, Fast Payment, and Bakong, which enables inter-bank transactions in real-time and cost-effective ways. This system will provide more opportunities for customers to use KHR in their transactions and reduce their dependence on USD.
KT: CMA members are said to be concerned about high cost of funds which impacts lending rates. As a direct result, NPL’s may also rise. What percentage of CMA members NPL or poor performing loans are in Riels when compared to the USD?
Sok Voeun: Members are indeed concerned on the high cost of fund which continue to increase, while the existing clients are using fixed interest rate. This can impact the profit margin of the institutions.
The NPL 30+ DPD of all members is 2.5 percent as of end 2022. The NPL for KHR currency is similar to the USD.
KT: What are CMA’s main programmes, activities, or strategies to encourage wider usage of the Riel in the economy and among its customers and how does financial literacy assist in this aspect?
Sok Voeun: CMA has taken a proactive role in promoting the usage of the national currency, Khmer Riel (KHR), in the economy and among its clients’ members and the public. CMA encourages members to offer competitive interest rates for KHR loans and deposits, ensuring that KHR is available at all times in each branch and through ATMs. CMA works closely with NBC to implement policies that support the use of KHR, and include the promotion of national currency in our financial literacy campaign. CMA’s financial literacy campaigns play a vital role in promoting the wider usage of KHR among customers. These campaigns are delivered through various channels, such as community-based activities, workshops, media and online resources. Moreover, CMA also supports the use of KHR in the rural economy, which reflects differences in client behavior and needs when compared to urban areas.
CMA strongly believes that the efforts of stakeholders, customer education, national policies, and digitalization will lead to increased confidence in KHR among consumers and ultimately make it the most used currency in Cambodia.
KT: What percentage of microloan transactions in the urban areas in Cambodia see the USD as the main currency of choice as compared to the Riel and Rural Areas?
Sok Voeun: In general, approximately 20 percent of loan portfolio in the microfinance sector are in Khmer Riels.
KT: What is the possibility of encouraging the ‘unbanked’ or those who rely on informal borrowings in Cambodia to use the Riel solely or more than the USD when they leave this category and become part of the economic sphere?
Sok Voeun: Unbanked customers should use financial services from formal licensed financial institutions and banks. Formal MFIs and banks should continue educating their clients on the important of using KHR.
Cambodian Microfinance Association will keep on its momentum to promote the use of the Riel and educate the public on its importance, while continue encouraging its members to provide more competitive interest rates for both loans and deposits in Riel and make Riel notes available at all times at each branch and other channels.
Source: https://www.khmertimeskh.com/501276884/khr-plays-very-important-role-in-building-a-stronger-cambodian-economy-2/