Microfinance growth boosts financial stability
Microfinance growth boosts financial stability
One of Cambodia's prominent microfinance institutions (MFIs) released its sustainability report, showing that 90% of respondents expressed satisfaction with its contribution to their enhanced well-being over the previous 12 months.
The December 5 report details LOLC Plc's collaboration in the Client Self-Perception Survey with Oikocredit, a worldwide cooperative and social investor. The effort involved interviewing 760 correspondents about the financial and non-financial changes in their lives between May 2022 and May 2023.
The survey targeted clients from eight branches across key regions, including coastal, plain, plateau, mountainous and Tonle Sap Lake areas.
Among 549 respondents who disclosed an increase in income during the period, 94% attributed the growth to the MFI's support and customised financial solutions. Of the 409 clients with savings, 80% saw an increase in their reserves portfolio over the past year.
“This … underscores LOLC’s ability to instill financial discipline and cultivate long-term financial stability among its clients,” said the report.
According to LOLC, of the clients reporting an income increase, 90% (494) confirmed that their earnings met their basic needs, demonstrating its success in enabling financial security for its clients.
Its CEO Sok Voeun lauded the outcome. “We are pleased to see that 63% of our clients own a business … These are positive indicators of our clients' financial resilience.”
Lay Sokheng, director of the Department of Economic Research and International Cooperation at the National Bank of Cambodia (NBC), remarked during a conference in late November that despite external challenges, the Kingdom’s financial industry remains robust.
“Credit growth in the microfinance sector has continued at a healthy pace compared to the same period last year, primarily attributed to contributions from the household, trade and commerce, agriculture and service sectors,” he stated.
He added that the liquidity positions of commercial banks and deposit-taking institutions have remained strong, as evidenced by their Liquidity-Coverage Ratios (LCRs) being higher than the regulatory requirement of 100%.
“Borrowing in the banking and microfinance sectors has been increasing steadily, mostly in long-term forms, aiding better liquidity risk management. While the profitability of MFIs has marginally declined due to higher provision expenses, the capital of banks and MFIs remains robust, surpassing the regulatory requirement of 15%,” he stated.
According to the Cambodia Microfinance Association (CMA), at the end of Q3 2023, the sector had a total loan balance exceeding $5 billion and more than 1.5 million loan customers. Deposit-taking MFIs held over $2 billion in deposits with nearly 2 million depositors.
The industry, comprising over 900 offices and employing more than 20,000 individuals, does not include banks that are members of the association, as per the CMA.
