In the last decade, the growth of the banking sector is playing important role in sustaining Cambodian economic growth because of three factors: political stability, economic policy and social consistency. By the way, the breakout of the world financial crisis is deeply affecting the developing and developed countries. According to Cambodian analysis did not deeply express concerns over Cambodian banking sector hit strongly by the global economic recession.
The growth of financial institutions in Cambodia, benefiting both individuals and society as a whole, will be a fundamental factor in ensuring the sustainability of Cambodia’s long term economic growth.
In order to curb the inflation and avoid global economic storm, National Bank of Cambodia (NBC) had doubled the reserve requirement for commercial banks from 8 percent to 16 percent (about 36.5 million U.S. dollars).
Hing Thoraxy, senior researcher for Cambodian Institute for Cooperation and Peace (CICP) was quoted by the Economics Today as saying that “Cambodia’s banking system is not strongly affected by the World economic crisis because most of banks do not depend on foreign source of finance,†he added that banks that operate in Cambodia do not rely on loans from other foreign banks and they do not buy stocks in the international market.
Oung Ming Tech, deputy director-general of Cambodia Public Bank, said that his bank was not facing a financial problem, because it depends wholly on its parent bank in Malaysia, reported VOA.
Kang Chandararot, the president of the Cambodian Institute of Development Studies, said that the growth of financial institutions was a symptom of an increasing healthy Cambodian economy, reported the Cambodia Life.
“So far, the banking sector in Cambodia has not been affected by the global financial crisis because our banking system hasn’t been integrated into global banking. The fact that we don’t have a stock market also shelters us from the shocks,†Tal Nay Im, director general of the National Bank of Cambodia, quoted by the Phnom Penh Post.
In Channy, the president and CEO of ACLEDA Bank Plc, said that domestic deposits exceed customer loans and most banks have sufficient reserves to support customers’ transactions and withdrawal. In Cambodia, total deposits in all banks reached about US$ 2,700 million, while loans totaled about US$ 2,300 million as of August 2008, reported the Economics Today.
Aun Porn Moniroth, Secretary of State for the Ministry of Economy, said that “Cambodia’s financial sector has little direct exposure to outside markets. We have no stock market, and banks in Cambodia have not borrowed much money from foreign banks,†reported Xinhua.
In order to avoid the world market crisis, Cambodia’s large commercial banks have begun competing with each other by increasing deposit rates, with the annual rate at several banks up to 8 percent in November. It is because of facing limited from outside lenders. Therefore commercial banks are seeking to bring in more local capital.
Yes it is right that Cambodia Banks would not effect by the global financial turmoil because they are not really connected or doing much business with banks around the world as in lending or borrowing. But Cambodia economy would eventually effect by this turmoil – small or large scale, subject to the Foreign Direct Investment in the early phase of next year.
I think many banks are earning a huge return now since most of people, borrowed money from the bank to buy too many lands since last year, are facing foreclosure and also being in debts because no money to pay the repayment plan. As we all know real estate in Cambodia is so dead right now, there isn’t anyone wishing to buy any land or properties. One of my friend had loaned from the banks and now facing foreclosure by losing his land one piece to another because he doesn’t have money to pay the repayment loan and no one wants to buy his lands. That’s suck, isn’t it?
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Hi Phnom Penh;
I do agree with you that Banks in Cambodia are making profits than their counterparts in other part of the world because Cambodia banks would not give a loan to anyone who has no collectoral, the banks are not really doing any business outside Cambodia such as listed in stock market, they don’t actually have to raise much capital from overseas to top up their operation needs.
Any real estate business around the world have it cycle which would be boomed for certain period then the slow-down if the economy is bad such as the case in USA. Much of land and real estate price in Cambodia is driven by spectaculation rather than the real-need itself and is driven by local rich and famous who have the insight to where is the project may be developed and other repatriate funds from overseas.