Cambodian banks' customers have an array of options to choose from, but industry insiders are split on whether the large number of commercial banks best serves the sector.

Twenty-nine commercial banks were operating in the Kingdom at the end of 2010 – too many, given the country’s population of 14 million, according to some bankers.

“The system overall would be stronger if you had a smaller number of big banks,” says ANZ Royal Bank chief executive Stephen Higgins, who believes five big banks would be  enough for Cambodia.

Australia’s 26 million people are served by four major banks, yet the Kingdom has more than seven times as many banks despite its much smaller population, Higgins says.

Higgins lists higher regulatory costs and an inability to invest in superior services as reasons why the Cambodian market requires fewer comm-ercial institutions.

Increased supervision drains  resources from the National Bank of Cambodia, he says.

Meanwhile, smaller banks lack the capability to deliver complex financial products or high-demand services such as internet banking.

Higgins says consolidation may best be achieved by overseas banks entering the Kingdom’s market, as he presently sees no attractive targets for ANZ Royal.

“What I would like to see is new international banks acquire an existing licence in this country. That will help drive consolidation,” he says.

Canadia Bank vice-president Dieter Billmeier calls Cambodia “overbanked”, but he doubts there will be any consolidat-ion this year. Billmeier says it is more likely that the country’s leading banks will continue to capture the bulk of the available business, leaving smaller companies in much the same position they occupy now.

“There’s still room for expansion for the big players,” he says, predicting significant growth over the coming years.

“All the others don’t play a significant role, and things will stay that way for the foreseeable future.”

However, ACLEDA Bank chief executive officer In Channy says the smaller banks play a key role by offering unique services their larger peers do not, whether they are particular credit-card brands or loans to specific industries.

“The customer likes a choice. This is one of the main reasons that small banks can exist and grow,” he says.

“If 29 banks are too many, why do others keep coming?”

Officials from smaller banks say they can see paths to growth through both market niches and a large, untapped consumer base.

“Small banks have an opportunity to grow and become big banks,” says Juveris Tenisons, chief marketing officer at the Advanced Bank of Asia in Phnom Penh.

Tenisons claims ABA has been able to turn itself into a larger player by changing its top-level management and its marketing strategy, rather than by means of mergers or acquisitions.

A changed focus on retail customers and small businesses has elevated ABA to number 10 on the National Bank of Cambodia’s list of top banks in terms of total assets for 2010, he says.

Tenisons predicts the country’s banking industry will change “quite dramatically” over the next few years as smaller banks are better able to compete with their larger peers.

Han Peng Kwang, general manager at the HwangDBS Commercial Bank in Phnom Penh, also rejects consolidation as a growth strategy.

Instead, he is looking to expand his branch network in the city and other provinces.

Han points to the large number of Cambodians not yet using banks as sources of potential growth.

“Smaller banks can create a niche for themselves by providing services that are not offered by other banks,” he says.