In the May 3 edition last year, The Economist came out with a scary headline: ‘The global financial system is in danger of fragmenting’. The context was different, but it was very much an essential reflection of what the global economy has been going through. Contrast that with Cambodia. The Kingdom withstood the inevitable shocks and overcame them in many departments. Much of the credit goes to the sagacious measures initiated by the National Bank of Cambodia. In fact, the banking sector has turned into a bulwark and a pillar of economic stability. In tune with the Royal Government’s policy to stimulate economic activity, NBC has allowed banking and financial institutions to negotiate loan repayment terms. According to data from NBC, in 2024, the total assets of banking institutions surged by 8.2 percent, loans by 3.3 percent. By any measure it’s not a minor achievement.

Cambodia’s banking sector has proven resilient and trustworthy, serving as a key pillar of economic stability despite global uncertainties and domestic challenges. Backed by prudent regulatory measures and strong public confidence, the sector continues to play a vital role in supporting economic recovery. While credit growth has slowed amid cautious lending and weaker demand, robust deposit inflows, high liquidity, and ongoing reforms highlight the sector’s ability to withstand external shocks and adapt to evolving financial landscapes.

According to the 2024 Annual Report and 2025 Work Plan of the National Bank of Cambodia (NBC), the banking system in Cambodia comprises 59 commercial banks, nine specialized banks, four deposit-taking microfinance institutions, 85 non-deposit-taking microfinance institutions, 114 rural credit institutions, 13 third-party processors, four payment service providers, 30 payment agents, one credit information-sharing system provider, five foreign bank representative offices, and 3,327 foreign exchange businesses.

The system’s total assets grew by 7 percent, reaching 369.4 trillion riels ($91.1 billion). The banking sector accounted for 93.2 percent of total banking system assets, followed by the microfinance sector at 6.4 percent and the financial leasing sector at 0.4 percent.

Credit increased by 3 percent to 242.9 trillion riels ($59.9 billion), while deposits — the main source of funds — grew by 16.3 percent to 230.9 trillion riels ($57 billion). Capital also saw an increase of 5.2 percent, reaching 40.5 trillion riels ($10 billion).

On the banking system, Governor of NBC Chea Serey said that credit continues to grow, albeit at a slower pace. This decline is attributed to both demand and supply factors. On the demand side, the slow recovery of certain sectors such as construction and real estate, tourism, and wholesale and retail has led customers to reduce borrowing.

On the supply side, banking and financial institutions have adopted a more cautious approach to providing credit due to heightened uncertainty in regional and global economies, she explained.

However, deposits continued to grow robustly at a rate of 16.3 percent, supported by a strong capital position and high liquidity, indicating that the banking system remains resilient and enjoys strong public confidence, she added.

In alignment with the Royal Government’s policy to stimulate economic activity—particularly to alleviate the financial burden on businesses and individuals facing difficulties—NBC has allowed banking and financial institutions to negotiate loan repayment terms with customers. To facilitate the effective implementation of this policy, some regulations have been further relaxed, while maintaining the stability of the banking system as a top priority.

“Key measures include keeping the reserve requirement ratio at a low level of 7 percent and implementing a capital conservation buffer ratio of 1.25 until the end of 2025. These measures enable banking and financial institutions to maintain higher liquidity to continue lending to customers,” Serey said.

Recently, there has been an increase in informal financial services, including credit services offered via mobile phones and social media, often accompanied by impersonation of government officials or official accounts of ministries and institutions.

These actions have caused public confusion and significant social consequences, including excessively high interest rates, unfair contract enforcement, exploitation of borrowers, and intimidation—leading many individuals into excessive debt.

Additionally, NBC has collaborated with relevant ministries and institutions to enhance monitoring and support for the real estate, tourism, and agriculture sectors, she said, adding that, efforts have also been made to raise public awareness of financial issues, particularly the growing prevalence of illegal online loans by fraudsters, which pose significant threats to society and household economies.

Overall, over the past two decades, NBC and the country’s banking system have undergone significant reforms and continuous modernization in line with international standards, Serey said.

These efforts have strengthened the foundation for maintaining financial stability, supporting economic growth, and withstanding external shocks.

“Despite recent global crises, the banking system has demonstrated resilience and progress. In the context of low credit growth over the past two years, NBC remains capable of introducing necessary accommodative measures.

“These measures include fully easing capital buffer requirements and maintaining the reserve requirement ratio at a low level until the end of 2025, enabling banking and financial institutions to maintain high liquidity for providing credit, as well as restructuring loans to support businesses and ease the burden on individuals facing temporary repayment difficulties,” Serey said.

Amid heightened global economic uncertainty, NBC has reinforced its risk monitoring and assessment of the banking system’s stability, as well as its supervision of individual banking and financial institutions. The integration of banking and financial institutions has been encouraged to enhance business resilience.

Furthermore, consultations with relevant stakeholders have been held to gather comprehensive input for the formulation of specific micro- and macro-prudential measures to manage risks and prevent crises.

“As the economic and financial sectors become increasingly interconnected, collaboration among all stakeholders is essential to strengthen risk management mechanisms and improve crisis prevention and resolution,” Serey said.

To further enhance the resilience of the banking system and support the Royal Government’s strategy for developing the informal economy, NBC has encouraged banking and financial institutions to open accounts and provide payment services for micro, small, and medium-sized enterprises (MSMEs) and self-employed individuals.

The Financial Transparency Corridor (FTC) has been developed as a digital infrastructure to establish pre-agreements between banking and financial institutions in Cambodia and partner countries.

This corridor aims to facilitate cross-border trade and financial services for MSMEs, enabling them to match supply and demand, expand market reach, and improve access to cross-border financing through information sharing among banking and financial institutions in partner countries.

NBC & banking sector

According to data from NBC, in 2024, the total assets of banking institutions increased by 8.2 percent to 342.8 trillion riels ($84.6 billion). Loans rose by 3.3 percent to 220.1 trillion riels ($54.3 billion), reaching 2.4 million accounts.

Loans were primarily distributed across key sectors of the economy, including retail trade (16.9 percent), home ownership (12.5 percent), real estate trading (11.6 percent), personal lending (10.1 percent), construction (9.7 percent), agriculture, forestry, and fishing (8.9 percent), wholesale (8.8 percent), manufacturing (4.3 percent), hotels and restaurants (4.0 percent), and others (13.2 percent).

The average interest rate on deposits in riel and US dollars decreased to 5.71 percent and 5.18 percent, respectively, lower than the rates in 2023 (6.74 percent and 5.64 percent). Meanwhile, the average interest rate on loans increased to 12.11 percent for riel and 10.30 percent for US dollars, compared to 12.05 percent and 9.92 percent in 2023.

Sok Chan, Head of Financial Inclusion and Public Relations at the Association of Banks in Cambodia (ABC), told Khmer Times that, compared to 2022 and 2023, the ABC has observed that credit growth in the banking sector has recovered at a slower pace in 2024.

Several factors, particularly the lingering effects of the Covid-19 crisis, global economic uncertainty, and geopolitical instability, have directly and indirectly impacted key sectors of the Cambodian economy, such as real estate, construction, and tourism, Chan said. He added that these factors have further affected the banking sector.

Both demand and supply factors are crucial to the slow credit growth. On the demand side, the slow recovery of sectors like construction, real estate, tourism, and wholesale and retail has led to reduced borrowing, Chan explained. On the supply side, banking and financial institutions have become more cautious about extending credit amid high regional and global economic uncertainty, he added.

When asked whether low credit growth is detrimental to the banking sector—whether it signals maturity or resilience—Chan said that Cambodia’s banking and financial institutions (BFIs) continue to remain resilient, maintaining prudential ratios such as the capital adequacy ratio, liquidity framework ratio, and adhering to the applicable regulations set by the National Bank of Cambodia (NBC).

Despite reduced profitability due to additional provisions for losses and a significant rise in the cost of funds and operating expenses, the banking sector remains stable, Chan said. He noted that the growth rate of the sector will not mirror the 20-30 percent growth seen before the Covid-19 era. “Currently, growth in the range of 7 percent to 10 percent is considered a good sign, indicating that the sector remains resilient and strong. Despite the challenging and volatile situation, the banking sector continues to provide credit across all sectors, maintaining resilience and public confidence,” Chan said.

“The banking and financial sector continues to make significant contributions to supporting and developing the economy and improving the financial environment. Banking and financial institutions have expanded their operational networks and diversified their financial products and services, enhancing operational efficiency,” he added.

This expansion includes the opening of 2,739 branches across the capital and provinces, the deployment of 5,896 automated teller machines (ATMs), and the provision of financial services through electronic, internet, and mobile platforms, according to Chan.

In response to a question about what measures ABC will take to strengthen the banking sector and enhance its resilience, Chan said that under NBC’s leadership, ABC works closely with its 75 member institutions to ensure compliance with the laws and regulations set by NBC and the Royal Government. The association also works to strengthen self-regulation within the banking sector.

“To ensure the long-term development and resilience of the financial sector, promoting and enhancing consumer protection remains a core agenda of the association. ABC has introduced several initiatives aimed at building trust, supporting financial education, alleviating financial burdens, addressing consumer debt issues, and promoting responsible lending practices,” he said.

According to Chan, key initiatives include the Banking and Financial Institutions Code of Conduct (BFI Code of Conduct) which established operating standards for banking and financial institutions to promote efficiency, trust, accountability, and responsible business practices.

Loan Guidelines help protect customers from the risk of over-indebtedness and mitigate potential risks to the banking and financial sector. Credit Contract Standards encourage fair competition, product and service transparency, and enhanced consumer protection.

Responsible Lending Certificate Program provides credit officers and approval officers with training on ethical principles, consumer protection, and responsible lending practices.

Complaints Mechanism Framework and Complaints Hotline facilitates transparent and efficient complaint resolution for consumers.

Financial Consumer Center (FCC), which will be established soon, will offer financial education, complaint resolution services, a hotline, and debt mediation support.

Additionally, ABC has developed financial education content for the public and has partnered with NBC to promote the use of formal financial services across the country.

Microfinance sector

According to NBC’s report, the total assets of microfinance institutions (MFIs) in 2024 reached 25.6 trillion riels ($6.2 billion). Of this, loans increased by 1.9 percent to 21.4 trillion riels ($5.3 billion), with 1.6 million accounts.

These loans were primarily distributed across key economic sectors, including household units: 32.8 percent, agriculture: 20.8 percent, trade and commerce: 20.1 percent, services: 11.8 percent, construction: 6.7 percent, transportation: 2.7 percent, Manufacturing: 2.7 percent, and others: 2.4 percent.

The average interest rate on deposits in MFIs declined to 6.44 percent for riel and 6.51 percent for US dollars, down from 7.27 percent and 7.65 percent in 2023, respectively. Meanwhile, the average interest rate on loans decreased to 16.64 percent for riel and 14.25 percent for US dollars, compared to 16.91 percent and 14.69 percent in 2023.

Dith Nita, Chairwoman of the Cambodia Microfinance Association (CMA), stated that the microfinance sector has played a crucial role in Cambodia’s economic and social development by offering financial services, particularly credit while prioritizing responsible customer protection.

“It has expanded financial access to all segments of the population, especially low-income families and those in remote areas, enabling them to secure adequate financial resources to support their livelihoods,” Nita said.

Despite its progress, Cambodia’s microfinance sector continues to face several challenges. These include criticism from NGOs and foreign media, unethical practices by some institution staff, weak governance and internal controls, inconsistent application of consumer protection principles and regulations, and low financial literacy among clients. The growing presence of informal lending has also raised concerns.

“However, I remain optimistic that through collaborative efforts from all stakeholders—under the leadership of NBC and the United Nations in Cambodia, as announced in 2024—the microfinance sector will be able to address these challenges and continue its sustainable growth,” Nita said.

To address these issues, the CMA has launched key initiatives and continues to work closely with regulators, development partners, and member institutions. In 2024, the Association introduced several measures, such as the Code of Conduct for Banking and Financial Institutions, Credit Provision Rules, Credit Contract Standards and Standard Clauses, and the Code of Conduct for Equitable Lending.

Sok Voeun, Chief Executive Officer of LOLC (Cambodia) Plc and Vice Chairman of CMA, highlighted the sector’s significant contributions to economic growth, social development, and poverty reduction in Cambodia.

Among the major accomplishments of the past year, the CMA and the broader microfinance sector successfully implemented the Code of Conduct for Banking and Financial Institutions, Credit Provision Rules, Credit Contract Standards and Standard Clauses, and the Code of Conduct for Equitable Lending, he said.

Furthermore, the Association organized regional workshops, provided training for CEOs and board members, and carried out community-based financial security projects, Voeun added.

“These initiatives would not have been possible without the contributions, support, and cooperation of all stakeholders, particularly the dedicated members of the Association,” Voeun said.

Positive development, but…

Speaking to Khmer Times, Hong Vannak, an economic researcher at the Royal Academy of Cambodia, explained that the data indicates a decrease in the number of borrowers, yet an increase in the overall amount of credit extended

From a broader macroeconomic perspective, this shift is seen as a positive development for Cambodia’s economy, suggesting a more cautious and purposeful approach to borrowing, he added.

“When the number of borrowers is low but the amount of credit is large, it is a good thing. This suggests that fewer citizens are borrowing as much as before, and the funds are being used for business, purchasing cars, and other purposes,” Vannak said.

He noted that this shift reflects a growing trend of investment rather than consumption. Fewer people are taking out loans, but those who do are using them for productive purposes rather than for non-essential spending.

“Currently, most loan users are investing in enterprises to improve or increase production, among other things,” Vannak continued. This signals a change, with businesses focusing more on growth and development through borrowed capital.

“This is a positive sign, indicating that small and medium-sized enterprises (SMEs) are gaining momentum. If the loans are used effectively, SMEs will grow, leading to increased production, job creation, and overall benefits for the national economy,” Vannak added.

He stressed that the growth of SMEs could have a far-reaching impact on Cambodia’s economic landscape, fostering innovation, job creation, and boosting national productivity. This could ultimately contribute to a more robust and resilient economy in the future.

This article is firstly published on Khmer Times

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