Logo of Phnom Penh Post newspaper Phnom Penh Post - NBC gives banks, MFIs greenlight to issue bonds

NBC gives banks, MFIs greenlight to issue bonds

NBC gives banks, MFIs greenlight to issue bonds

The National Bank of Cambodia (NBC) announced on Friday that local banks and microfinance institutions (MFIs) can now issue corporate bonds or list equity securities on the nascent Cambodian stock market, a move industry insiders claim will help financial institutions raise capital and be less reliant on foreign borrowing.

According to the central bank’s new prakas, signed by Governor Chea Chanto on September 27 and posted on NBC’s website late Friday night, financial institutions can issue equity securities at a maximum of 20 percent of the company’s voting share and can issue debt securities at a rate that does not exceed 20 percent of total assets.

“This prakas is targeted to enable financial institutions to raise funds for business expansion in order to contribute to Cambodia’s economic growth,” the NBC statement said.

The central bank noted that in order for financial institutions to issue equity and debt securities they first need permission from the NBC and must have their total amount of equity be valued at approximately $15 million, or 60 billion riel. The financial institutions also need to prove they have strong fiscal performance and good governance.

Sean Thornnin, an economics lecturer at the University of Cambodia in Phnom Penh, said the prakas gives clarification on how financial institutions can issue corporate bonds, which could help close the gap between the demand and supply of funds.

He noted that with the top seven MFIs owing about $1.09 billion to overseas lenders, local commercial banks flush with cash now have a financial tool to provide lending to the MFI sector.

“When MFIs can raise funds through issuing bonds or issuing equity, banks that have a surplus can buy bonds or equity to help reduce the mismatch in funding,” he said. “With NBC permission, many major MFIs will have new sources for funds so that they are not as reliant on foreign borrowing.”

Hout Ieng Tong, chairman of the Cambodia Microfinance Association and CEO of Hattha Kaksekar Limited (HKL), said the NBC’s prakas will allow financial institutions to receive funds at lower costs.

“For HKL, we are more interested in issuing a bond, as we think that it is a good financial tool that provides us more options,” he said, adding that the firm was not interested in selling equity.

Seng Chan Thoeun, head of corporate finance at SBI Royal Securities, said that the central bank’s regulations were in line with its Financial Sector Development Strategy 2016-2025 which encourages financial institutions to issue equity and debt securities.

He added that this was a positive development in establishing a vibrant capital market in Cambodia that does not rely on short-term customer deposits, but allows for larger long-term funding that can be mobilised to accelerate financial sector growth.

“When a corporate bond is available as a financing option in Cambodia, it can become a great solution for institutions, mainly MFIs, to secure capital,” he said.

However, Thornnin said that a bond market would take time to take off and would rely on strengthening public awareness and trust.

“But still I think this is a good start and I hope it will bring long-term benefits,” he said.

In August, the Securities and Exchange Commission of Cambodia announced that it had identified three different types of corporate bonds it would issue, including a secured bond, guaranteed bond and a plain bond, providing an international credit rating agency can give them a value.

MOST VIEWED

  • Ministry requests school opening

    The Ministry of Education, Youth and Sport on Thursday said it would request a decision from Prime Minister Hun Sen to allow a small number of schools to reopen next month. Ministry spokesman Ros Soveacha said if the request is granted, higher-standard schools will reopen

  • Kingdom eyes India FTA, China deal set for August

    Cambodia is studying the possibility of establishing a bilateral free trade agreement (FTA) with India to open a new market with the second-largest regional economy. This comes as an FTA with China is scheduled to be signed next month while similar negotiations with South Korea

  • Judge lands in court after crashing into alleged thief

    Sen Sok district police on Thursday sent a Koh Kong Provincial Court judge to the Phnom Penh Municipal Court on manslaughter charges after he crashed his car into a woman riding a motorbike on Wednesday, killing her. District police chief Hour Meng Vang told The

  • Preah Vihear court drops charges against villagers

    The Preah Vihear Provincial Court has dropped all charges against eight ethnic Kuoy villagers who were in a land dispute with the Hengfu Group Sugar Industry Co Ltd since 2014. Wednesday’s decision was made by the judge who tried the case on June 10. The eight

  • Gov’t to boost Siem Reap tourism

    The Ministry of Tourism released the results of an inter-ministerial committee meeting concerning Siem Reap province’s Tourism Development Master Plan for 2020-2035 on Wednesday, revealing the government’s plan to improve the overall tourist landscape there. The meeting was attended by Minister of Tourism

  • Residents ordered to remove structures on Phnom Penh’s canal

    Phnom Penh municipal governor Khuong Sreng has ordered authorities to act against the perpetrators who built houses along the Luo 5 canal in Meanchey district. The municipal administration plans to create a committee to solve the matter. The order was given on Wednesday while Sreng led

  • ‘On the offensive’: Cambodia to load up on loans to stimulate economy

    As the dust settles on the economy, Cambodia comes to grips with what needs to be done to turn the economy around, starting with a big shopping list for credit ‘We are going on the offensive,” Vongsey Vissoth, Ministry of Economy and Finance permanent secretary

  • Eighty replacement peacekeepers set for Mali mission despite Covid

    Eighty Cambodian blue helmet soldiers who completed the peacekeeping mission under the UN umbrella in Mali will return to Cambodia on Friday, said the Centre for Peacekeeping Forces spokeswoman Kosal Malida. “To protect their families and communities from the Covid-19 pandemic, the 80 are required to

  • Government set to make up for cancelled April holiday

    The government is set to make up for a five-day Khmer New Year holiday late this month or early next month. The holiday was earlier cancelled due to the onset of Covid-19. The announcement is expected on Friday as the government is studying a range

  • Families told to register for cash handouts

    The government has called on poor families to apply to commune authorities for evaluation to receive financial support during the Covid-19 crisis. A $300 million budget has been planned for implementation within a year. Ministry of Economy and Finance secretary of state Vongsey Visoth said this