Cambodia’s economy has been experiencing double digit growth for more than a decade, especially the banking and financial sector.

For 2012, international financial institutions and the Cambodian government both forecast that Cambodia’s GDP growth would be between 6.5 and 7 per cent.

The banking and financial sector which had been starting from nothing, has been playing an important role for economic development by allowing people to access to finance.

Cambodia became a member of the Association of South East Asian (ASEAN) in 2009. Today, Cambodia is playing a very important role of chairing ASEAN this year in leading and driving the block to achieve its ASEAN Economic Community by 2015.

ASEAN’s Central Bank governors committed and agreed together on the financial liberalisation, banking integration as well as a lot financial initiatives to unify ASEAN’s banking sector across the region.

The bankers and economists of Cambodia’s central bank’s authority, the National Bank of Cambodia (NBC) recognised that the country’s banking and financial sector had improved significantly, developing even more than other ASEAN’s members like Laos and Myanmar.

NBC’s Director General Ngoun Sokha said that Cambodia’s sound and strong banking and financial regulations and laws, especially regular banking supervision, were the main drivers for attracting more and more investment.

Cambodia’s open economic policy allows foreign investors to own 100 per cent of their Cambodian companies and enjoy with the free flow of capital. 

This important condition is seen as a primary driver of crucial momentum which other ASEAN members don’t have, that boosts access to finance for the economic development.

“Cambodia emerged from the civil war with empty hands and has since developed a banking sector that continues to rapidly improve by providing a good, optional service and products to customers. This definitely contributes to our economic development,’ she said.

She said Cambodia and some other younger members of ASEAN had been working to enforce its cooperation and integration with all ASEAN member states in all economic sectors, including banking and finance sectors.

“On the banking and financial sector side, we have participated in a lot of initiatives of ASEAN including the ASEAN financial liberalization initiative, capital account liberalization, as well as capital market development. All of these are the main elements of cooperation within ASEAN integration,” she said. 

“Besides those three, we have recently been working on ASEAN Banking Enforcement and Integration and are looking at possibilities to enhance banking sector to become even more developed and to have more linkage within ASEAN neighbors through banking services across the region.”  

At the same time, she said that the five elder ASEAN members continued to provide a lot technical support and capacity building to promote the development of financial sector to the younger members in order to fill the development gap.

“We cannot compare ourselves to other countries because we have different histories.  Other ASEAN members have developed capital markets operating for many years, while Cambodia has just started,” she said.

The ASEAN Economic Community 2015 blueprint requires all the member states to have capital liberalization, calling for the free flow of capital within ASEAN.

“At this point, Cambodia has become even more developed compared to other members because some member still set barriers don’t allow the free inflow and outflow of capital because they have strict policies on capital. But in Cambodia, we welcome the free flow.”

“We are very open and anyone can come while some ASEAN members don’t allow foreign banks to own 100 per cent. So, we cannot say that our banking and financial development is a bit late in the integration compare to other due to each member has their own vision.

So I don’t agree that we are running behind others due to we have different objective to improve and develop.''

The President and CEO of ACLEDA bank, the biggest locally-owned bank in terms of outstanding loans and total asset, recognized that Cambodia’s strong and sound banking laws and regulation were definitely attracting more and more investment into the industry.

“We got very improve in the industry as you seen the got a very sharp growth in number commercial banks, Microfinance Institution as well as loan and deposit,” said ACLEDA’s In Channy.

“It is good for the economy.  If we compare just only to Lao and Myanmar, we are better than them because we have enough banking infrastructure and facilities for the growth of the sector,” he said.

“We have good laws which push to have more banks and MFIs, so this increases enforcement and increases access to finance. This in turn promotes an increase in employment and income generation.

The two will push economic development and they are the powerful tools for poverty alleviation,” he said.

“If we compare our banking and financial industry to the same poorer members of ASEAN, we are in the lead because of greater access to the lower income banking and financial customers.

If we compare Cambodia’s regulations and laws on MFIs to 50 other Asian countries, we are in the lead, at about the same rank as the Philippines.”

“We are making the right moves because we already have a mission and a vision. We implement and improve everything according to the demands and needs of our customers,” In Channy said.

Hiroshi SUZUKI, CEO and Chief Economist, Business Research Institute for Cambodia (BRIC), said that the CLMV nations (Cambodia, Laos, Myanmar and Vietnam) have been working hard to improve their banking and financial sectors in order to catch up with the many initiatives in the development of ASEAN.

“The improvement in banking supervision in the CLMV countries is the most important policy measure to strengthen each banking sector. I hope the NBC and the Cambodian government will continue their great effort to strengthen the supervision on all the banks and MFIs in Cambodia,” he said.

“It would be very challenging to consolidate all the policies and regulations on banking sectors of all the member countries, and it would take a long time. Also, it is necessary to consolidate them with a step-by-step approach.

The drastic change on the banking sector could invite serious shock to the market and cause negative effects on economic performances,” he added.

Ngoun Sokha said that the NBC was still conducting regular supervision for commercial banks and MFIs to make the industry stronger by enhancing regulation enforcement, building direct capacity and creating transparent accounting and financial system as well as building fair competition.  

NBC’s data shows that so far Cambodia has 32 commercial banks (including seven specialized banks), a number which increased from 28 since last December.

Outstanding loans reached $4.9 billion ending this June compared to $4.32 billion since December 2011, an increase of about 14 per cent while total deposits reached $6 billion, an increase 15.67 per cent.

The number of MFIs also increased to 32 so far this year, up from 19 last year while outstanding MFI loans increased by 25 per cent according data from the Cambodia Microfinance Association (CMA).

To contact the reporter on this story: May Kunmakara at [email protected]