Cambodia’s private debt level remains below global red-line
Cambodia’s private debt level remains below global red-line
While Cambodia’s private debt rate remains below the global red line, addressing informal loans and improving credit data accuracy could enhance financial transparency and stability, said Ky Sereyvath, an economic researcher at the Royal Academy of Cambodia (RAC).
Speaking at a roundtable discussion on ‘Debt Situation in Cambodia’ at RAC on Wednesday, Sereyvath said private debt reached $57 billion, compared to 180 percent of Gross Domestic Products (GDP) in the past, but now it is only 135 percent due to the current GDP surged to $45 billion.
“Cambodia’s debt pressure compared to GDP does not seem to be a problem while the global debt accounted for 146 percent of global GDP. Thus, Cambodia’s private debt is still below the global red line,” he maintained.
Apart from Sereyvath, others who took part in the discussion include Mak Reaksmy, Director of Regulatory Policy and Risk Assessment Department of the National Bank of Cambodia (NBC), Toch Chao Chek, member of the Board of Directors of the Association of Banks in Cambodia (ABC), Sok Voeun, Vice-Chairman of the Board of Directors of Cambodia Microfinance in Cambodia (CMA), Chou Vannak, Director General of Real Estate and Mortgage Business Regulator, and Chea Pov, director of Anti-Cybercrime Department of Ministry of Interior.
RAC President Sok Touch moderated the discussion.
During the discussion, Sereyvath quoted extensively from the latest Credit Bureau Cambodia (CBC) report. He said there are 5 million debtors, but the actual number is less than 4 million because if a couple is using a loan, the system counts it as two borrowers. Such a record increases the number of borrowers.
Most of the debt owed individually (personal loan) is up to $50 billion of which about $7 billion is used for business purposes, he added, 30+ DPD ratio (the 30-day late payment) rate is 7.5 percent and the 90-day late payment rate is 6 percent, which is regarded as Non-Perform Loan (NPL) rate, but compared to other countries, Cambodia’s NPL rate are lower. In Thailand, it is more than 10 percent.
“Currently, informal loans are still a problem because they are not recorded in the CBC system,” said Sereyvath.
Reaksmy said that NBC has issued a number of circulars to make the financial sector in Cambodia continue to grow and be resilient. Among the valid measures that are being implemented, the NBC last August has continued to put in place a number of measures aimed at facilitating the financial sector and boosting economic growth, she added.
“Our goal is to facilitate customers in the banking and financial sector,” Reakmy said, adding that, “The principles that we are implementing is that we continue to allow banking and financial institutions to apply the capital reserve conservation at the same rate of 1.25 percent until the end of 2025, apply the reserve requirement of 7 percent until the end of 2025. One important measure is NBC allows banking and financial institutions to restructure loans for clients to alleviate the spending of borrowers or customers.”
Voeun said that it is necessary to study the cash flow of customers, income, expenses of customers before implementing any loan restructure. If the client’s income and expenses are good and their repayment potential is high, it is not advisable to restructure the loan.
Chao Chek said that both associations – ABC and CMA – usually work together to promote the financial sector to grow and be resilient.
ABC is involved in promoting financial literacy to the people because when people have financial knowledge they can make the right financial decisions, especially for living in everyday life and do not fall into the debt trap, he added.
“The principle of banks is that we want our customer to grow unlike informal lenders, so the institutions will also grow together with the customers and so does the economy,” he said.
“During the Covid era, we implemented loan restructuring. Now even when the economy is not affected, we also restructure loans for customers to facilitate customers who have real financial problems.
In terms of NPL rate, it is 6 percent in the sector, which is high but with the help of the government and stakeholders, the NPL rate is under control,” he added.
