NBC backs loan restructuring programs amid economic growth
NBC backs loan restructuring programs amid economic growth
The National Bank of Cambodia (NBC) has reaffirmed its commitment to supporting loan restructuring programs, even as the Cambodian economy continues to exhibit robust growth.
Manufacturing and tourism sectors have seen remarkable traction as the economic growth is projected positively, but other sectors such as construction and real estate are still facing challenges and experiencing negative growth, NBC Governor Chea Serey said.
Serey emphasized that loan restructuring remains a crucial tool for helping businesses and households cope with the remaining effects of their financial burden.
All these challenges have caused some people to lose their jobs and incomes, Serey said, adding that, for people who have borrowed money from financial institutions they have faced challenges when it came to repaying which is why restructured loans are needed to be continued for customers who have difficulty with cash flow.
“To help people affected from the affected sectors, loan restructuring is definitely needed,” Serey said during a press conference held last week.
“Loan restructure provides flexibility in repayment terms and reduces financial burdens – these programs aim to support borrowers in navigating difficult times and promoting economic recovery,” she added.
The International Monetary Fund on September 30 projected Cambodia’s economy at 5.5 percent in 2024, driven by a strong rebound in garment and agricultural exports and the ongoing recovery in tourism.
However, the construction and real estate sectors are going through a correction, following rapid growth in prior years.
Credit growth has sharply slowed amidst deteriorating asset quality and high private-sector debt. In 2024 Q1, the non-performing loans (NPLs) rose to 6 percent of total loans, reflecting emerging vulnerabilities with the temporary rollback of the Covid-19 forbearance measures, said the IMF. “Rising NPLs in the tourism and real estate sectors also pose risks to growth and financial stability.”
On August 28, NBC directed financial institutions to make loan restructure without any restrictions, with interest rates remaining the same to customers who face cash flows. The new measures are valid until the end of 2025.
During this period, the NBC will closely monitor loan restructuring as well as credit interest rates. In addition, the NBC also requires all banking and microfinance institutions to submit weekly loan restructuring reports.
Representatives from commercial banks and microfinance institutions affirmed their commitment in implementing the NBC’s directive.
“The method of loan restructuring has more options, tailored to the customer’s ability to make payment,” said Sok Voeun, CEO of LOLC (Cambodia) and Vice-Chairman of the Cambodia Microfinance Association.
The loan restructuring has been announced by the National Bank of Cambodia to banking and microfinance institutions since the outbreak of Covid-19 in Cambodia.
The decision was due to the fact that the Cambodian economy as well as the world economy were affected, especially since the production chains were disrupted or paused, both domestic and foreign transport also faced problems for the tourism sector in which some restaurants and hotels have been shut down or paused.
As of the end of August 2024, the restructuring of loans in the banking sector amounted to more than $4 billion with 287,000 customers, according to the Association Banks in Cambodia.
