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Logo of Phnom Penh Post newspaper Phnom Penh Post - Loan growth ready to take off

Outstanding loans and credit in Cambodia are projected to increase more than 50 per cent in the next six years
Outstanding loans and credit in Cambodia are projected to increase more than 50 per cent in the next six years. Pha Lina

Loan growth ready to take off

Cambodians are forecast to borrow more than double the amount they are borrowing today from microfinance and commercial banking institutions by the year 2020, according to the latest outlook from the Credit Bureau of Cambodia (CBC).

Gary Wood, CEO of the CBC, presented the bureau’s first medium-term outlook yesterday in Phnom Penh. According to the bureau’s findings, consumer credit and outstanding loan balances are set to increase 147 per cent in the next six years from $5.7 billion to $14 billion in 2020.

“We wanted to give you a snapshot of where we see – based on age, based on year – the market being. We will now monitor those predictions, we will adjust those predictions if required,” Wood told the audience of about 200 people.

According to the CBC’s findings, micro-finance and banking customers in total are set to increase from 1.9 million to 3.3 million by 2020, with people aged between 30 and 39 forecast to continue to be the most common borrower.

However, according to the CBC’s data, Cambodians aged between 40 and 49, more than any other age group, are expected increase the average amount they borrow from financial firms in the coming years, up 85 per cent in the micro-finance sector and 118 per cent in the commercial banking sector by 2020.

“As people are getting older, they are borrowing more,” Wood said.

Micro-finance institutions (MFIs) are expected to increase existing portfolios, which currently sit at 1.5 million accounts, by 159 per cent in the next six years while commercial banks’ portfolios will increase 147 per cent from the existing 389,000 accounts.

In Channy, CEO of Acleda Bank, Cambodia’s largest commercial financial firm, was confident in the CBC’s predictions saying that despite such large credit growth forecast, Cambodians would not become over-indebted.

“To reach $14 billion by 2020 (total loans outstanding), it can be achieved. If we look back the over the past five years, there has been three-fold growth of loans outstanding. These figures correspond with the growth of GDP per capita, so individual wealth of the people can handle this amount of debt, with no doubt,” Channy said.

Channy said the financial sector will be able to cater to the CBC’s predicted increase in customers also, with more institutions providing multiple products and services through multiple channels such as branches and electronic banking infrastructure.

Grant Knuckey, CEO of ANZ Royal however cast doubt over the industry and the consumer’s ability to match the aggressive predictions set out by the CBC yesterday when compared to Cambodia’s GDP growth predictions, which is currently forecast at 7 per cent annually.

“In relation to the increase in loans – at a projected 20 per cent compound growth over the next 6-7 years, that is a very aggressive credit growth path relative to the likely growth of GDP and wealth,” Knuckey said.

“I would question the ability of the borrower base to service that kind of growth, and I would also question the ability of the system to fund it,” he said.

Knuckey emphasised the need for more electronic, mobile and real-time settlement products in the financial services industry in order to handle the 3.3 million customers CBC’s predicts to be engaged in the sector by 2020.

“Branch-based banking will not be able to absorb it,” Knuckey said.

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