Outlook and wish list for 2026

Outlook and wish list for 2026

The right FDIs are needed in the productive economic sectors and industries, such as agriculture, manufacturing, and tourism, where transfer of knowledge and technology is done in a committed and systematic way to develop the local talent pool.

It’s the time of the year again when many will start putting up a wish list and resolutions for the New Year, and also reflect and account for the resolution(s) made for the current year.

On a personal front, I am grateful and bless that I had one personal resolution achieved in 2025, which was to have my book Right Angle – The Collection Volume One published.

Customary to previous year where I had penned-down the resolutions and wishes for the New Year [Note: Please see “New Year’s Resolution” (for 2025)] in Right Angle column in Khmer Times on January 6, 2025), I have provided below an outlook and wish list from a banking and finance sector perspective, which I hope can be achieved for the good and resiliency of the sector.

Outlook for 2026

1. How low can the interest rate go?

Interest rates are on a downward trend in most global economies.

Despite commendable and good efforts to promote the usage of the Khmer Riel by the Regulators, the US Dollar is still the dominant currency in Cambodia, and the US Dollar interest rate in-country is influenced by the US Federal Reserve (Fed).

The extent how much the interest rate will be lower in the US will depend on forward-looking economic data to be received, which includes inflation and payroll/job data.

Recent narratives by the Fed and even by the US President (so much for Fed independence) are more dovish in nature and recently published economic data also support this notion. Interest rate cuts are almost certain in 2026 and the question to ask is what is the eventual neutral rate, or a rate where the economy is at full employment and stable inflation.

Lower interest rates will augur well for bank borrowers, and would also encourage more lending activities, which is much needed in an emerging and growing economy like Cambodia. The past two years of low and muted loans growth have had an impact on the economy and it is important that banks start lending to the “right and productive sectors” to stimulate the economy.

On the flip side, a declining interest rate will not be good for deposit holders and savers. Banks will need to rethink their deposit strategy and this phenomenon will provide opportunities for banks to look into wealth management products besides the traditional fixed/time deposit products.

2. Is the industry’s Non-Performing Loan (NPL) at its peak?

The banking sector is currently experiencing an elevated NPL situation and while individual banks have been working and negotiating with their customers to deal with and manage the NPL situation, more action is needed to address this matter.

The proposal of setting up an Asset Management Company (AMC) has been mooted and discussed for some time. The concept and intent for an AMC is certainly good and required in these times; and the two key important considerations for the AMC set-up are ownership and capital/funding. Based on regional experience and observations, an AMC ought to be owned by the Government and not by the private sector to avoid conflict of interest. The longer we take to deliberate and decide on the AMC structure and proposal, the effectiveness of having an AMC will be diluted.

3. Do we expect new entrants/bank(s) in the sector?

The possibility always exists, but the probability will likely be low based on the current banking climate domestically and globally.

Banking today is different from yesteryears.

Besides stricter compliance requirements, it is getting more “expensive” from a shareholder perspective; with higher capital requirements and expected heavier investments into technology, which would place pressure on profitability and for new entrants, a longer timeframe to breakeven.

A (new) banking license comes with responsibilities.

Responsibility cuts across the customers/public, communities and country.

Banks ought to practice good lending and deposit-taking behaviours and actions to ensure the customer’s interest is protected at all times. In emerging economies such as Cambodia, it is important that all financial institutions prioritize proper financial literacy among their customers before providing financial access to them.

2026 Wish List

1. Less is more

We wish there were no untoward surprises, such as allegations or sanctions imposed on any banks, as the optics are always negative in such situations.

In the banking sector, all employees have a mandatory “code of conduct” training and yearly refresher, which all new and existing bankers have to comply with. This practice certainly needs to be continued and extended to the bank’s board of directors and shareholders. The form it takes for the board of directors and shareholders can be different, but the substance has to be the same i.e. all stakeholders have to take responsibility and ownership on “good conduct” and “doing the right thing” at all times.

Good conduct is an important virtue in any business and more so in banking, and it is always a good time to be sharp and focus to reinforce good virtues across the industry.

2. More is best

We wish there were more Foreign Direct Investments (FDIs) into the country, which includes attracting regional/global banks to set up their representative offices, branches, or subsidiaries in the Kingdom.

“Right” FDIs are also needed in the productive economic sectors and industries, such as agriculture, manufacturing, and tourism, and equally (if not more) important, where transfer of knowledge and technology is done in a committed and systematic way to develop the local talent pool.

In my November 2025 ‘Champions find their way’ article, we acknowledge that despite the challenges and headwinds in the banking sector, there are still banking institutions that are resilient with strong financial positions. “Champions” also exist in every other industry, and we hope the right FDIs find their way to these champions in other sectors.

3. We want more

Cambodia is still a relatively young country in its demographic profile, blessed with a young and eager-to-learn population. Reiterating on Wish No. 2 above (on FDIs), we wish that knowledge transfer is hastened, and the local talent pool will seize this opportunity to learn and subsequently contribute and be value accretive to the banking (and other) sector(s), community and country.

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