The financial sector retains a key role as the Kingdom and the world at large grapples with the spread of the novel coronavirus, disbursing critically-needed funds to keep businesses afloat.

While new daily infections continue to be detected in the Kingdom, the February 20 community transmission has been significantly reined in, as the government cautiously reopens the economy and expands vaccine rollouts to inoculate as much of the population as possible.

The government placed Phnom Penh and adjacent Takmao town in Kandal province under lockdown on April 15, in a move to break the chain of Covid-19 transmission from the latest outbreak. The lockdown was lifted three weeks later at the onset of May 6.

Association of Banks in Cambodia (ABC) general manager Heng Koy discussed the role of financial institutions (FI) during the ongoing health crisis, in a virtual interview with The Post’s May Kunmakara.

What are FIs doing to help clients during and post-lockdown?

In late February, Covid-19 started to spread inside Cambodia and has severally impacted all aspects of life in the Kingdom. The situation has been hard for many people, especially those in the lockdown areas.

The Cambodian economy and FIs – including ABC members – were certainly not immune to those dramatic impacts. Banks and microfinance institutions (MFI) together have restructured loans worth circa $4.5 billion, of which $3.5 billion are still active.

Banks are in full operation again and customers are able to receive services as usual, which was difficult during the lockdown and restrictions based on geographical location.

Given those difficulties, the ABC instructed all of its member institutions to provide leniency to customers affected by lockdown. Many affected people could not make payments, not due to unwillingness, but simply due to not being able to reach any branches.

The government is working hard to support all sectors and to relieve the strain on people as well as our institutions.

Within the last year, ABC members have also shown tremendous solidarity by not only sharing action plans and supporting the Cambodian people, but also by donating substantial amounts of financing as well as physical goods to support the government in the fight against Covid-19.

Furthermore, the ABC and the Cambodia Microfinance Association (CMA) have actively supported initiatives to facilitate vaccination programmes for all staff at FIs – all front-line workers at FIs should be vaccinated by the middle of the year.

This will help to ensure that FIs can operate normally and provide their services to customers and the broader economy. Certainly, this will also ensure that customers are safer when visiting physical branches, with the risk of Covid-19 transmission greatly reduced.

What measures has the industry applied to relieve the burden of clients during the health crisis?

On April 7 and 11, ABC and CMA made joint statements outlining additional measures to further support the government and borrowers affected by Covid-19.

The statements contained six key directives to ABC and CMA members.

First, FIs shall exempt clients infected with the coronavirus from interest payments and penalties for at least one month, and automatically restructure credit – with the client’s consent – deferring principal payments for three months.

Clients purporting to be infected with the virus must present a positive test result confirmed by the relevant authority.

Second, clients under quarantine are to receive automatic loan restructuring – with their consent – deferring principal and interest payments for one month, and waiving all penalties.

Third, FIs shall continue to provide prompt, convenient credit-restructuring benefits to clients affected by the pandemic.

Fourth, FIs shall provide emergency and supplementary financing loans with relaxed terms and conditions, at lower interest rates, to sustain and rehabilitate family businesses during and after the Covid-19 crisis.

Fifth, FIs shall restructure loans for first homes and waive all penalties.

Sixth, FIs shall offer as many benefits as possible to clients who have died of Covid-19.

With the February 20 community outbreak largely under control, what steps will FIs take to disburse more loans and boost the economy?

Most banks have preserved ample liquidity to extend loans and to approve and provide towards new loan requests. A majority of banks have solvency ratios more than twice the regulatory minimum.

The solvency ratio depicts how liquid a financial institution is, and a low ratio could ultimately affect depositors. In Cambodia, banks have a very healthy capital base.

The government and especially the National Bank of Cambodia (NBC) have also shown great support in ensuring that banks are liquid, to disburse needed funds into the economy and towards borrowers in need.

The NBC has also provided support to banks and FIs in order to boost growth in other sectors. Moreover in March, the Ministry of Economy and Finance launched a $200 million Business Recovery Guarantee Scheme (BRGS), aiming to support businesses during the Covid-19 pandemic.

The BRGS was designed to support businesses – including micro, small and medium-sized enterprises and large firms – to enhance their access to formal loans from participating FIs (PFI) for working capital, investment and business expansions, said a Credit Guarantee Corporation of Cambodia Plc (CGCC) press statement.

The CGCC’s main mission is to provide credit guarantees to PFIs to support and assist financially viable businesses that lack collateral when applying for loans.

This interview has been edited for length and clarity.