Chea Chanto, the governor of the National Bank of Cambodia, says that the bank takes a hands-off approach when it comes to the riel’s stability
National Bank Governor Chea Chanto shows off a new riel note at his offices in Phnom Penh.
What is the role of the National Bank of Cambodia?
After many years of destruction, the NBC was recreated on October 10, 1980, as the central bank of the country. The original purpose included bringing back a monetary system and reviving the banking sector with an eye towards supporting the development of the private sector. The NBC plays two main important roles in this context: acting as a monetary authority and as a supervisory authority over commercial banks.
What new policies are currently being considered by the NBC?
The next areas of reform will encompass enhancing corporate governance and disclosure rules for banks, improving the credit information sharing system, enabling leasing business and establishing the necessary framework for the establishment of a national payment and settlement system.
Where is the banking sector headed over the next five or 10 years?
We hope everyone will use banks as other people in developed countries around the world do. We are promoting the use of ATM and credit cards, and many people are opening accounts in commercial banks. We're moving step by step. The NBC wants everyone to make tax and utility payments using the banking system so money can be organised and used to generate more money. We allow as many commercial banks to enter the market as possible in order to promote competition. And the banking sector will keep growing - everyone should have a bank account.
We hope everyone will use banks as other people in developed countries around the world.
How has the growth of the private sector and foreign investment in Cambodia affected the role of the NBC in regulating Cambodia's monetary policy?
Having a strong and sound banking sector is not an end in itself.
The ultimate goal is to foster private-sector development.
However, the NBC is well-aware of the challenges that private-sector growth and foreign investment could pose for the stability of the banking sector.
Therefore, we are making a constant effort to ensure the regulatory process does not get too far behind the market.
Can the NBC connect rural people with the banking and finance sector?
The central bank helps all people access the banking and finance sector so they have access to loans and can avoid being cheated, which happens to poor people in the countryside with high interest rates from informal money-lenders.
And to encourage it, the NBC has also lent wholesale to the Rural Development Bank and microfinance institutions.
Some economists have criticised the central bank for not implementing more pro-poor initiatives.
Yes, some have regarded our work in this area negatively. But, in fact, more than 500,000 families have received loans from banks and microfinance institutions. Look at ACLEDA bank, it has offices everywhere. It has helped people in rural areas to get involved with the banking system, understand saving and how to make incremental investments.
Our goal is "A Post Saving" where people save money and use it to earn more money.
Does the use of the US dollar in Cambodia's economy present any problems for consumers or companies?
The use of the US dollar in Cambodia has dated back more than two decades. Such use has never been a policy decision of the [government] but reflected the preference of the market participants for a substitution currency to the domestic one given the economic difficulties facing the country at the time. Once people get used to the conveniences of using hard currency, there seems to be resistance to reversing the process, even after the macroeconomic conditions have been improved.
It will take a long time to adjust people's behavior.
We are not going to force the public to make payment in riel only. We have been encouraging the use of the riel.
Our policy is to promote payment in riel and build more public trust in it. Our economy is following market demand. We can't implement an administrative economy. People want to use it.
The NBC conducted a study on the advantages and disadvantages of such development for the Cambodian economy, and we understand that de-dollarisation cannot be accomplished by rigid legislation but requires the creation of an environment that stimulates the use of domestic currency by the public.
NBC has printed notes ranging from 50 riels to 100,000 riels, and has issued coins as well. Why haven't these caught on?
Big payments can be made in US dollars, so big notes of riel are not very popular. However, we encourage government tax payment in big riel notes. NBC is trying to design a big riel note that will attract users. For example, the 20,000 riel note is likely to be popular. We can't force the public to use coins. They are difficult to carry. Developed countries use coins for public phones and bus fees.
Why has the exchange rate between the riel and dollar remained stable over the last decade?
This is a policy of the central bank - the bank does not control it but oversees the way the market does. The bank watches closely the way the market moves.
We send our staff to monitor at the markets. We report on it three times a day.
We can take action if we find cases of speculation. If it runs smoothly, we will not do anything.
If it is not sound, we will intervene to prevent speculation.