The Current State of Cambodia’s Microfinance Sector in 2025!

As of early 2025, Cambodia’s microfinance sector is undergoing significant reforms to promote responsible lending and enhance consumer protection. The sector, which has played a crucial role in financial inclusion and poverty reduction, faces challenges such as over-indebtedness and the need for stricter regulatory oversight. In response, the National Bank of Cambodia (NBC) and the United Nations (UN) have taken proactive steps to address these concerns.

Ongoing Reforms and Key Developments

In November 2023, the NBC and the UN launched a multi-stakeholder consultation process to review the rapid expansion of the microfinance sector. This initiative was primarily focused on addressing the growing concerns of excessive debt burdens among borrowers and ensuring that financial institutions adopt responsible lending practices. The consultation process resulted in a structured roadmap for reform, emphasizing sustainability and financial inclusion.

By January 2025, a second high-level dialogue was convened to assess the progress of these reforms. Among the 22 priority actions identified, four have been fully implemented, fifteen are in progress, and three are in the initial stages. These efforts aim to create a more stable and consumer-friendly financial environment. Some of the primary areas of focus include:

• Regulation and Supervision: Strengthening the supervisory framework to ensure that microfinance institutions (MFIs) comply with responsible lending practices. Stricter guidelines have been introduced to monitor loan disbursement and prevent predatory lending.
• Borrower Assistance: Implementing measures to educate borrowers on financial products and improve their ability to manage debt responsibly. Financial literacy programs are being expanded to rural areas where access to financial education has traditionally been limited.
• Technological Advancements: Encouraging the adoption of digital financial services to enhance efficiency and accessibility. Mobile banking and fintech solutions are being leveraged to extend financial services to underserved populations.
• Informal Lending Regulation: Addressing the risks associated with informal lending practices by strengthening the role of local authorities in financial management. Many borrowers have been vulnerable to unregulated lenders, leading to higher debt risks.
• Agricultural Risk Insurance: Exploring insurance solutions tailored for communities dependent on agriculture. Given the impact of climate change on farming, there is an increasing need for financial products that safeguard rural livelihoods against unpredictable losses.

Strengthening Financial Inclusion

Beyond regulatory improvements, partnerships within the sector are playing a vital role in ensuring sustainable financial inclusion. The Cambodia Microfinance Association (CMA) and the Cambodia Credit Guarantee Corporation (CGCC) have signed a Memorandum of Understanding (MoU) to bolster support for micro, small, and medium enterprises (MSMEs). This collaboration aims to:

• Enhance capacity-building programs for small business owners.
• Expand access to digital financial services, making transactions more convenient and transparent.
• Strengthen financial literacy initiatives, ensuring that business owners and individuals make informed financial decisions.

The Road Ahead

Despite the challenges, Cambodia’s microfinance sector remains an essential pillar of the country’s financial ecosystem. The ongoing reforms reflect a commitment to balancing financial growth with consumer protection. By fostering a more responsible and inclusive financial environment, Cambodia aims to ensure that microfinance continues to contribute positively to economic development while safeguarding the interests of borrowers.

As regulatory measures take effect and financial institutions align with responsible lending practices, the sector is expected to become more resilient and sustainable. These efforts will not only protect borrowers from excessive debt but also empower them to use financial services as a tool for economic advancement. The success of these reforms will depend on continued collaboration between regulators, financial institutions, and development partners, ensuring that Cambodia’s microfinance sector remains a force for positive economic change.

Conclusion

Cambodia’s microfinance sector is at a crucial turning point in 2025. While the industry has been instrumental in providing financial access to underserved communities, the challenges of over-indebtedness and regulatory gaps have necessitated bold reforms. The initiatives led by the NBC, UN, CMA, and CGCC highlight a collective effort to reshape the sector into a more responsible and consumer-friendly system.

Looking forward, the effectiveness of these reforms will be determined by how well they are implemented and embraced by all stakeholders. Strengthening financial literacy, leveraging technology, and improving supervision will be key to ensuring a robust and sustainable microfinance ecosystem. If these measures succeed, Cambodia will not only protect its borrowers but also establish a stronger foundation for economic growth and financial inclusion in the years to come.

Ultimately, the transformation of Cambodia’s microfinance sector is about striking a balance—ensuring that financial institutions can continue to grow while prioritizing the well-being of the people they serve. With ongoing reforms and collaborative efforts, the sector is on a path to becoming more transparent, ethical, and beneficial for all involved.

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Cambodia has rapidly embraced digital transformation, particularly in its financial sector. One of the most significant milestones in this journey is the introduction of the Bakong System, an advanced payment platform developed by the National Bank of Cambodia (NBC). Launched in October 2020, Bakong is a blockchain-based interbank payment system that facilitates seamless transactions between different financial institutions, promoting financial inclusion and efficiency.

Unlike traditional banking methods, Bakong integrates banks, microfinance institutions (MFIs), and payment service providers (PSPs) into a single digital platform. It enables users to make real-time transactions, regardless of the financial institution they are registered with. The system is compatible with KHQR Code payments, allowing merchants and consumers to process digital transactions effortlessly across multiple providers.

One of the key objectives of Bakong is to bridge the financial gap by offering secure and accessible digital payment options to both urban and rural populations. Cambodia has seen an impressive rise in mobile banking adoption, thanks to high smartphone penetration and improved internet access. The Bakong system, in particular, has significantly contributed to reducing reliance on cash transactions, enhancing transparency, and lowering operational costs for financial institutions and businesses alike.

Beyond domestic transactions, the system also supports cross-border payments, particularly with countries like Thailand, Laos, Vietnam, Malaysia, and India, fostering stronger regional financial integration. Given the increasing popularity of cashless payments, Bakong is expected to play an even more pivotal role in Cambodia’s digital financial landscape in the years to come.

How Many Financial Institutions Operate the Bakong System in Cambodia?

According to the 2024 annual report from the National Bank of Cambodia, as of 2024, a total of 69 financial institutions were part of the Bakong system. Out of these, 60 institutions had already officially launched their services, while 9 others were in the process of implementing the system.

The adoption rate of Bakong has been steadily increasing, reflecting a growing trust in digital financial transactions. The same report highlights that in 2024, the number of registered users of the Bakong system reached 642.5 thousand accounts, marking a 7% increase compared to 2023.

Additionally, banking institutions and payment service providers have expanded their services under Bakong. The number of customers with bank accounts or e-wallets who can transact via the Bakong system (also referred to as “Customer Reached”) is now estimated at 30 million accounts—approximately 1.69 times the total population of Cambodia.

Growth of KHQR Code Payments in Cambodia

Another important feature of the Bakong system is its KHQR Code payment function, which simplifies digital transactions. As of the end of 2024, financial institutions had successfully registered 4.5 million merchants to accept payments via KHQR Code, representing a 36.4% increase from the previous year. This surge highlights the rising preference for digital payment solutions among Cambodian businesses and consumers.

The Impact of the Bakong System on Cambodia’s Economy

The widespread adoption of the Bakong system has had numerous positive impacts on both the Cambodian public and the government. Dr. Hong Vannak, an economic analyst at the Royal Academy of Cambodia, has emphasized the growing popularity of digital payments among various demographics, especially in urban areas with reliable internet access.

Benefits for Consumers:

1. Convenience – Users can make payments without carrying cash, reducing risks associated with theft or loss.
2. Speed – Transactions are completed instantly, improving efficiency.
3. Security – Eliminates concerns over counterfeit money.
4. Health Safety – Reduces the risk of disease transmission through cash handling.

Benefits for the Government:

1. Lower Operational Costs – Reduces the need for printing physical banknotes.
2. Enhanced Financial Transparency – Facilitates better monitoring of money flows.
3. Support for Financial Inclusion – Encourages more people, including those in rural areas, to engage in formal financial activities.

Conclusion

The Bakong System has revolutionized Cambodia’s digital payment landscape, fostering financial inclusion and economic efficiency. With 69 financial institutions participating, and over 30 million potential users, the platform continues to grow as a key driver of Cambodia’s cashless economy. Its KHQR Code feature further enhances accessibility and ease of transactions, making digital payments a mainstream option.

As Cambodia continues to integrate innovative financial technologies, the Bakong system is expected to play a central role in shaping the country’s economic future, reinforcing digital payments as an essential component of everyday transactions.

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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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