The first quarter of 2016 was a busy one for Cambodia’s banking and finance sector, with a number of new entrants to the market prompting some sector-watchers to start talking about consolidation. Many eyes were on China’s continuing economic travails, but other countries, especially Thailand, continued to show confidence in the Kingdom’s burgeoning economy.
Cambodia’s central bank sounded an optimistic but cautious note on the economic prospects for the Kingdom in 2016, citing textile exports, low oil prices and rising domestic demand as the main drivers of growth in 2015. The National Bank of Cambodia projected gross domestic product (GDP) to grow by 7 per cent in 2016. The report said that US dollar appreciation and an increase in garment sector wages were emerging challenges for the country.
A number of development banks sounded a note of caution over Cambodia’s economic development in the wake of large falls on the Shanghai stock exchange and worries about China’s economic fundamentals. Cambodia in the past few years has been heavily linked to China through massive inflows of investment that are being used to develop the country’s infrastructure, as well as growing Chinese tourist arrivals.
On the back of a 28 per cent increase in profits last year, Acleda Bank said it would increase its focus on development of its electronic banking infrastructure in the ASEAN region, but said it had no plans to go public. According to the bank’s CEO, Acleda increased its profits partly due to an increase in the use of electronic and mobile banking, which will become a top priority in 2016.
In what was considered one of the biggest deals in Cambodia’s financial sector history, Thailand-based Bank of Ayudhya reached an agreement to acquire the local microfinance institution Hattha Kaksekar, with the deal expected to be valued at upwards of $140 million. The Thai bank confirmed the agreement to buy Cambodia’s fourth-largest microfinance institution, paving the way for its entry into the Kingdom’s crowded and highly competitive micro-lending sector.
In a bid to combat illegal activity, Cambodia’s securities regulator formed a task force to crack down on unlicensed operators in the securities sector. The 21-member task force will monitor illegal activity in the trading of securities and investigate cases of unlicensed operators, including the source and amount of capital invested in these firms,
Kasikornbank, Thailand’s fourth-largest bank by assets, received a licence to open its first branch in Cambodia. The bank will begin with one branch in Phnom Penh, though the location had yet to be finalised. The bank announced its application for a Cambodian commercial banking licence in 2014, and is set to become the 37th commercial bank operating in the Kingdom.
Sources in the banking sector said French bank BRED Banque Populaire – part of the second-largest banking group in France – will start commercial operations in Cambodia later this year, marking the first foray for a European bank in the Kingdom since the late 1990s.
The Ministry of Economy and Finance raised concerns about the rapid growth of Cambodia’s credit and real estate sectors, which it said could pose risks to economic growth, while emphasising that policy measures were being taken to mitigate these risks. The ministry said that while the country was in a better fiscal position than a few years ago, there were structural weaknesses that needed to be addressed.
An annual performance review of Cambodian microfinance said the sector experienced another year of explosive growth, with both lending and deposits surging more than 40 per cent in 2015. Total issued loans by MFIs at the end of 2015 reached a record $2.9 billion, a 45 per cent year-on-year increase, with loans provided to 2 million borrowers. The average loan was $1,460.
The government signed an agreement with Wing (Cambodia) aimed at using the company’s mobile money platform and extensive nationwide network of agents for the collection of tax payments. The Ministry of Economy and Finance said that following the signing of a memorandum of understanding, taxpayers would soon be able to visit any Wing agent to pay their property or vehicle tax.
Australian offshore financial planning services firm Tag Wealth International announced it would establish an office in Phnom Penh to provide services for expatriates living in Cambodia. The company offers advice and recommendations to expats on life insurance, estate planning, retirement planning, offshore banking, investments and various financial products.
Prime Minister Hun Sen lauded the microfinance sector’s efforts to increase rural access to finance, while blasting certain unnamed MFIs and NGOs he accused of gouging consumers with high-interest loans and confiscating land assets when they failed to pay them back. The prime minister acknowledged the sector’s contribution to providing capital for farmers and small firms, but said some institutions were still taking advantage of consumers’ lack of financial education.
Cambodia’s central bank announced it wants to increase the use of mobile banking services, especially in rural areas, by encouraging Cambodians to open bank accounts and use the convenience and security offered by digital banking.
Cambodia’s central bank raised the minimum capital requirement of banking institutions operating in the Kingdom, doubling the capital threshold for commercial and specialised banks, and increasing it more than ten-fold for microfinance institutions. The National Bank of Cambodia now requires all commercial banks, including subsidiaries of foreign banks, to increase their minimum capital to the equivalent of $75 million. Analysts speculated the decision could lead to more consolidation in the sector.
The Asia-Pacific Development Bank obtained an approval letter from the central bank’s governor to operate a specialised bank in Cambodia, an official at the National Bank of Cambodia said.
Khieu Bophaphuong, director of the NBC’s licensing department, said the approval letter enables the bank to prepare an office and launch operations, although she could not provide any details about the bank’s shareholding structure, capital or operations plan.
The latest Asian Development Bank report tipped Cambodia’s economy to remain stable this year, as uncertainty surrounding China’s economic slowdown appeared to ease, while the country’s garment, manufacturing and construction sector continued to prop up the economy. In its flagship annual economic publication, Asian Development Outlook 2016, the bank’s economists forecast slightly lower expectations for Cambodia’s economic growth, projecting 7 per cent GDP growth this year, down from 7.2 per cent announced last September. It said 2017 could see a moderate level of growth of 7.1 per cent.
After more than a year of internal structural changes, Sathapana Ltd – the third-largest microfinance institution in Cambodia – completed its merger with a local Japanese-owned bank to operate a consolidated commercial bank following the National Bank of Cambodia’s (NBC) approval of its lending license. The merger has created a financial institution with a combined registered paid-up capital of $120 million and total assets of $722 million.