Cambodia / Consumer credit growth remains strong despite slight slowdown

By: Robin Spiess - Posted on: August 15, 2018 | Business

Cambodia has seen a rise in the number of financing institutions in recent years, with dozens setting up shop in the Kingdom to offer credit to consumers and commercial customers alike. As a result, total credit has increased steadily, with consumer credit growing by a staggering 45% since 2016

Cambodians at a shoping mall in TK Avenue in Phnom Penh, Cambodia Photo: Mak Remissa / EPA

Although recent statistics show that consumer credit growth has slowed in recent months, the country’s leading credit bureau has hypothesised that consumers will continue to help grow the credit market as the overall financial status of the country continues to improve.  

According to the second 2018 quarterly report released by the Credit Bureau of Cambodia (CBC), Cambodia’s total outstanding consumer credit now accounts for nearly 30% of the total credit market in the country.  

“We anticipate [consumer credit] will continue to see good growth in the future,” said Oeur Sothearoath, CEO of the CBC. “It is viewed that there is still room for credit growth in the market based on the back of the country’s steady economic growth, which is also expected continue to grow.”

He added, however, that the backbone of Cambodia’s credit growth remains not in the hands of consumers, but in the continued rise and success of the country’s small- and medium-sized enterprises (SMEs).

“SMEs are deemed to be the bigger contributing factor to the overall credit growth in this phase of Cambodia’s stable gross domestic product (GDP) growth,” he said.

The CBC Consumer Credit Index releases quarterly reports analysing the number of personal finance, credit card, and mortgage applications administered in the country. Officially launched in 2012, the organisation has a total of 152 finance partners in Cambodia – including banks, microfinance institutions (MFIs), leasing companies and rural credit institutions – that provide the CBC with data on a monthly basis.

While the CBC’s recent second quarter report noted a drop in average personal finance and mortgage applications from the start of the year, Sothearoath noted that this was a seasonal drop that would be corrected come the third quarter.

Perhaps most encouraging for the future of consumer credit growth is the Kingdom’s consistently low ratio of non-performing loans (NPLs), which is defined as the number of loans on which debtors are not making interest payments. In the second quarter of 2018, the NPL ratio actually fell marginally from the quarter before to just 1.3%.

Cambodia’s low NPL ratios consistently beat out those of its neighbours, whose annual consumer NPLs hover around 2% to 3%.

According to Sothearoath, the lowering of the NPL ratio in Cambodia has been a joint effort by hundreds of financial institutions.

“[A low consumer NPL ratio] reflects the strong efforts from all operators in managing the credit market in Cambodia,” he said.  “We at the CBC foresee that the NPL ratio will remain at a good, low rate for this market in the near future.”