In Cambodia, the trend of maintaining multiple bank accounts is more prevalent than ever before. On average, each Cambodian adult holds between 2 to 3 bank accounts. Data from the National Bank of Cambodia (NBC) reveals that for the first half of 2024, the Kingdom had 21.3 million deposit accounts, despite having only 9.8 million adults. This results in an average of 2.3 bank accounts per adult, highlighting a significant rise from previous years.
This increase in bank accounts raises an important question: Why do Cambodians have so many bank accounts? To understand this trend, we need to delve into several contributing factors, including historical practices, financial strategies, and the increasing digitization of financial services in Cambodia.
The Evolution of Banking in Cambodia: A Historical Perspective
Historically, inter-banking charges played a major role in the proliferation of bank accounts among Cambodians. Before the introduction of the Bakong system in 2016, transferring money between different banks was expensive due to high transaction fees. To avoid these fees, many Cambodians would open accounts with multiple banks, often aligning their accounts with those used by their families or spouses. This practice ensured cheaper fund transfers within the same bank network, leading to households typically maintaining 3-5 bank accounts.
While the introduction of the Bakong system—a blockchain-based interbank payment system—has reduced the need for multiple accounts due to its lower transaction fees, the habit of having multiple accounts has persisted for several reasons.
The Role of Loans and Credit in Multiple Bank Accounts
Another significant factor contributing to the high number of bank accounts in Cambodia is the management of loans and credit. According to a study by the Cambodia Microfinance Association (CMA) and M-CRIL, about 87 percent of borrowers have one to two loans, and a small but notable group even holds four or more loans. These loans often come from different financial institutions, including microfinance institutions (MFIs) and traditional banks. To manage these different loans efficiently, many Cambodians find it necessary to maintain multiple bank accounts, each tied to a specific loan or credit line.
This strategy allows them to manage their debts more effectively, keeping track of repayments and interest rates while maintaining a clear separation between different financial obligations.
Access to Financial Services and Gender Dynamics
The expansion of financial services across Cambodia has also contributed to the increase in the number of bank accounts. A substantial 48 percent of adult borrowers in Cambodia have access to at least one formal financial service, such as a savings account, credit, or microinsurance. Moreover, 67 percent of adults in Cambodia use some form of formal financial service, according to a report by the United Nations Capital Development Fund (UNCDF).
Interestingly, there are also gender dynamics at play. The data suggests that a larger proportion of women have access to financial services compared to men (51 percent vs. 45 percent). Women in Cambodia are often more inclined to save and manage daily financial transactions, while men are typically more confident in making borrowing decisions and managing deposit accounts with financial institutions. This discrepancy may partly explain why women are more likely to hold multiple accounts to manage different aspects of their financial lives effectively.
The Digital Banking Boom and Mobile Connectivity
The rapid growth of mobile banking has further fueled the rise in the number of bank accounts. In 2023, mobile banking transactions in Cambodia increased by 11 percent, reaching 746.7 trillion riels ($164 billion), up from 672.4 trillion riels ($183 billion) in 2022. This growth can be attributed to the widespread use of mobile phones in Cambodia. According to Digital 2023 Cambodia, there were 22.16 million active mobile connections in Cambodia in the first quarter of 2023, which is 131.5 percent of the total population. This suggests that, on average, each adult in Cambodia owns more than two mobile connections.
With mobile penetration rates exceeding 100 percent, digital banking has become a vital component of daily life for many Cambodians. The ease of managing finances through mobile apps and the growing trust in digital transactions have encouraged many to open multiple bank accounts to take full advantage of these digital services.
The Role of Financial Literacy and Digital Awareness
NBC, along with the Association of Banks in Cambodia (ABC), has played an active role in promoting financial literacy and encouraging the use of digital banking services, including the Bakong system. These initiatives have not only improved access to banking services but also fostered a culture where owning multiple bank accounts is seen as a practical financial strategy.
A Reflection on Financial Behavior in Cambodia
The reasons behind the high number of bank accounts in Cambodia are diverse and multifaceted. From historical practices aimed at avoiding inter-banking fees to strategic financial management of loans and the surge in digital banking, each factor has contributed to this trend. Additionally, gender dynamics and the widespread use of mobile phones have further shaped financial behaviors, leading to the proliferation of multiple bank accounts.
As Cambodia continues to develop its financial infrastructure and increase financial literacy among its population, it will be interesting to see how these trends evolve.
What are your thoughts? Do you use multiple bank accounts in Cambodia, and if so, why? Share your experiences and let us know how you manage your finances!