ABC: No shortage in capital for lending

Local businesses are a vital engine of economic growth, and are all the more imperative during the Covid-19 epidemic, he said at a meeting on this year’s work implementation strategy for the financial sector held in Siem Reap province on January 29.

Channy, who is also president and CEO of ACLEDA Bank Plc, explained that the sector is still welcomed by domestic and foreign sources of funding.

Through the National Bank of Cambodia (NBC) as the regulator, he said the government has introduced effective and up-to-date legal mitigation measures that ensure sufficient capital for operators in the sector and makes it easier for them to obtain loans from foreign sources than in the year-ago period.

He said: “As part of government regulatory easing measures for the banking sectors, the capital reserve requirement was reduced from 12 to seven per cent.

“It is very important that we have our freed-up cash for additional use – amounting to billions of dollars incorporated into growth in 2020.

“On the other hand is the capital conservation buffer, which was implemented in 2020 by the NBC, resulting in billions in extra usable funds.”

He laid special emphasis on the reduction of withholding tax on interest payable on foreign loans, which he said afforded the financial sector easier access to capital from overseas.

“Of course, we do not lack funding in Cambodia. To date, no foreign lender has said that lending to Cambodia is risky, hence we’re bound to get more funds.

“This is a good sign for the financial sector as well as the economy, because banks are the backbone of the economy and support small and large enterprises,” Channy said, adding that ACLEDA Bank plans to release $600 million in capital for small and medium-sized enterprises (SMEs) this year.

In March, the NBC launched a raft of measures to shore up the financial sector, including a reduction in the reserve requirement rate (RRR) on deposit balance from eight to seven per cent on the Khmer riel and 12.5 per cent on the US dollar for the following six months.

The central bank also delayed the conservation capital buffer (CCB) requirement to 2021, a move it expected would lower the solvency ratio.

And on June 19, the Ministry of Economy and Finance reduced the withholding tax rate that banks and microfinance institutions (MFIs) are obliged to withhold on interest payments that they make to domestic and international lenders.

Meanwhile NBC governor Chea Chanto was honoured as Central Banker of the Year in the Asia Pacific by magazine The Banker, owned by London-based Financial Times Group, for his leadership in successfully navigating through a stormy 2020 during the Covid-19 crisis.

Total assets in the Kingdom’s banks and MFIs grew to $59.4 billion at the end of last year, increasing 15.7 per cent from the end of 2019, according to NBC’s 2020 annual report.

Outstanding loans in banks and MFIs grew by 14.8 per cent to $37.3 billion by the end of last year, while deposits increased by 15.4 per cent to $33.8 billion.

Channy said the 15-16 per cent growth posted by the Cambodian financial sector outstrips similar figures logged in neighbouring countries.

The increase was also a response to the concerns of international development partners, who have expressed concern in the high growth rates registered by the Cambodian financial sector, which surged by more than 20 per cent each year before the health crisis.

Primarily addressing the World Bank, International Monetary Fund (IMF) and Japanese-led multilateral lender Asian Development Bank (ADB), he said: “With growth at this level, our development partners are sure to tell us that we can prevent risks.”

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