By the year 2020, more than 1.5 million Cambodians will open new credit accounts, causing the amount of unpaid loans to surpass $14 billion, according to a report released Tuesday by Credit Bureau Cambodia (CBC).
In the report, 2020 Outlook on Credit Demands, the CBC predicts the number of customers demanding credit from both microfinance institutions (MFIs) and banks to increase from roughly 1.8 million in 2014 to 3.3 million in 2020.
The number of customers opening credit accounts with MFIs is expected to rise from about 1.4 million this year to 2.7 million in 2020. The number of customers opening credit accounts with banks is set to increase from 371,966 in 2014 to 638,317 in 2020.
The CBC forecasts the total number of credit accounts, meanwhile, to rise from about 2.2 million in 2014 to 4 million in 2020.
The predicted dramatic increase in demand for credit will more than double the total outstanding balance of loans between 2014 and 2020, from $6.4 billion to $14.7 billion, according to the report.
The average loan size is also expected to increase between 2014 and 2020: from $1,182 to $1,502 for MFIs and from $12,797 to $16,732 for banks.
“This is significant growth,” said CBC CEO Garry Wood during the launch of the report at the Sofitel Hotel in Phnom Penh on Tuesday, which was attended by roughly 300 banking and finance executives.
In a press release, Mr. Wood said that “with accurate forecasting banking institutions can scale up operations and meet the future demand for the Kingdoms [sic] loans and credit.”
However, Grant Knuckey, CEO of ANZ Royal bank, said Tuesday that the predicted expansion of credit might not be sustainable, as it implies credit will be growing at a significantly higher rate than Cambodia’s GDP.
“This projection implies a widening gap of credit growth to GDP growth, which is not sustainable over the medium term, especially given the pace with which credit-to-GDP has already expanded over the past five years,” Mr. Knuckey said.
But Douglas Clayton, the CEO of Leopard Capital, a private equity firm operating in Cambodia, said there was still plenty of room for credit growth in the country, as long as lenders remained appropriately cautious.
“Cambodia is still an unleveraged economy and rapid credit growth is more sustainable here than in most countries,” he said.
“However, local financial institutions must be very careful to maintain their credit standards and not forget that economic downturns can arise unexpectedly and wipe out their capital.”