Applications for loans in the financial sector continued to drop in the second quarter of this year over concerns regarding the coronavirus outbreak and economic repercussions of the ensuing health crisis, according to a new report.
Consumer credit applications decreased overall by 34 per cent, Credit Bureau (Cambodia) Co Ltd (CBC) said in its “Consumer Credit Index Report: Quarter 2, 2021”.
“The most significant decrease was reported in personal finance applications dropping 34 per cent from the previous quarter, followed by [a] 32 per cent decrease in mortgage applications. Meanwhile, there was [a] 25 per cent decline in credit card applications compared to previous quarter.
“The total number of credit accounts saw a marginal decline by 0.40 per cent bringing it to around 1.30 million accounts. Outstanding balance grew by 3.42 per cent to reach $10.75 billion by the end of the quarter.
“In the second quarter of 2021, the number of consumers attempting to acquire credit in three different forms – personal finance, credit card, or mortgage – fell [overall at a] rate of 34 per cent.
“The largest drop was found in personal finance applications which decreased by 34 per cent with the highest decline of 37 per cent in the Plain region,” it said, using one its four denominations for Cambodian geographical regions – the other three being “Plateau”, “Coastal” and “Tonle Sap”.
“Mortgage applications decreased by 32 per cent whereas credit card applications fell by 25 per cent,” CBC added.
CBC CEO Oeur Sothearoath corroborated that the overall credit market situation remains under stress due to the impact of the Covid-19 pandemic.
“Similar to previous years, [the] credit market in the second quarter … slowed down [as per usual].
However, the drop[s] in quarter-on-quarter growth of both number and amount of credit application[s] [were] smaller compared to same quarter in 2020, when we witnessed major impact from the onset of the global pandemic.
“The 30+ DPD [days past due] ratio continue[d] to rise to 2.57 per cent, indicating a [quarter-on-quarter] drop in credit quality,” he said.
Prasac Microfinance Institution Plc senior vice-president Say Sony underscored some of the Covid-induced headwinds facing the sector, such as a slump in business activity and clients putting off expansion plans.
“Hands down, consumer credit dropped for the most part, due to the impact of recent Covid-19 outbreaks. Nevertheless, we at Prasac can still manage and our business will stay resilient in these hard times, particularly after the government and the NBC [National Bank of Cambodia] advised us to keep lending and implement all the best, special practices to help our clients,” he said.
As of July 31, Prasac’s loan portfolio stood at $3.348 billion, up by 10.5 per cent from $3.030 billion in March 31, and the number of borrowers grew by two per cent quarter-on-quarter, according to Sony.
For reference, Prasac noted in its first-quarter report that it had offered 13.024 trillion riel in loans to 447,999 borrowers as of March 31.
However, Sony raised concerns over the Kingdom’s inability to contain the third coronavirus outbreak – dubbed the “February 20 community event” – and now the spread of the Delta variant in local communities.
“That would have a direct impact at the macro level, which as one may plainly see, has prompted a new economic growth projection of around two per cent.
“Even so, we can see that our government, through relevant authorities, is working very hard to end the outbreak and rein in the spread of this Delta and ensure the success of the vaccine campaign.
“We do hope the situation will get better and better,” he said, stressing that Prasac is committed to “keep growing together with our clients”.
CBC added: “The percentage change in the loan amount sought through credit application also went down by 35 per cent which is significantly higher than that of last quarter [a six per cent contraction] yet relatively [low] compared to [the] same quarter in previous year [a 47 per cent reduction]”.
“This was due to the drop in application amounts across all product types – personal finance 39 per cent, credit card 27 per cent, and mortgage 17 per cent.
“[However, the] consumer loan balance continued to rise, increasing at 3.42 per cent as of June 2021. By the end of the quarter, there was a total of $10.75 billion outstanding consumer loan balance.
“Although mortgage loan shares only 11.26 per cent of total loan accounts, in terms of amount it captured more than half of the total consumer outstanding loan balance with the share of 52.47 per cent, whereas personal finance loans accounted for 46.93 per cent.
“The share of credit card loans remained low at 0.60 per cent. In overall, loan balance saw a positive growth in all regions – Plateau 4.4 per cent, Plain 3.6 per cent, Coastal 3.4 per cent, and Tonle Sap 2.7 per cent,” CBC said.