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Report: Banking system healthy

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A woman exits an ATM on Norodom Boulevard in central Phnom Penh. Political stability, growth in all economic sectors and a strong banking system were major drivers that reinforced public confidence in the Kingdom’s banking system last year, said the National Bank of Cambodia (NBC). Hong Menea

Report: Banking system healthy

Political stability, growth in all economic sectors and a strong banking system were major drivers that reinforced public confidence in the Kingdom’s banking system last year, said the National Bank of Cambodia (NBC).

According to its “Macroeconomic and Banking Progress 2019 Report and 2020 Outlook”, deposits and outstanding loans rose sharply by 25 and 26 per cent respectively over 2018.

Outstanding loans reached $19.6 billion and deposits with Cambodia’s seven money deposit-taking institutions (MDI) reached $22 billion last year.

“The banking sector was healthy and actively contributed to supporting financial inclusion, economic growth and poverty reduction.

“The loans boosted public consumption and contributed positively to the increase in economic activity. However, if the consumer doesn’t use the loan efficiently and with the right goal, the increase in loans will also bear risk to the financial sector,” said the report.

The Kingdom saw the 30 per cent increase in loan growth after three years of deceleration, the report said.

“The rebound was primarily backed by the construction and real estate sector, in addition to consumer lending and commercial loans due to an increase in income, demand and diversity of financial services.

Meanwhile, consumer loans such as product and housing loans rose significantly over the past few years,” it said.

Acleda Bank president In Channy said loans and deposits increased by seven per cent and 12 per cent respectively, contributing to strong revenue growth of around 40 per cent. Meanwhile, non-performing loans rose to around 1.2 per cent.

“These will pave the way and serve as a strong foundation to overcome challenges and ensure growth this year,” he said.

In December 2018, the International Monetary Fund (IMF) projected that Cambodia’s financial sector would continue to enjoy strong growth.

But it warned that factors such as macro-prudential measures and a broad policy response to address issues in the real estate sector may serve as risks.

“Directors noted positively that the Cambodian financial system is profitable, has sizeable capital buffers, and has low non-performing loan ratios.

“They noted, however, that credit has accelerated and is increasingly concentrated in the real estate sector and consumer lending,” said the IMF.

It added: “Lower credit growth, coupled with prudent fiscal policy and structural reforms, would also help reduce external imbalances.

“It is noted that promoting further financial market development and local currency use would allow the central bank to move towards a more robust and flexible monetary policy framework.”

There are 43 commercial banks currently operating in the Kingdom (15 locally incorporated, 15 subsidiaries, and 13 foreign bank branches), 14 specialised banks (one state-owned and 13 private) and seven MDIs.

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