The Asian Development Bank has approved the first disbursement of a proposed $30 million loan to strengthen Cambodia’s banking and insurance industries.
The first $10 million from the Financial Sector Program Loan will be given to the Ministry of Finance sometime early next year, ADB Country Director Urooj Malik said.
The government has already met the conditions of the loan, and an assessment will determine whether the next $10 million can be given in another three years.
“The program will help to enhance banking intermediation and raise public confidence by establishing and improving banking supervision, developing a key information infrastrucuture, and strengthening training insitutions in the financial sector,” according to an ADB statement from its main office in Manila.
The program, which follows a development plan called the “Financial Sector Blueprint,” also aims to strengthen Cambodia’s insurance sector and “lay the foundation for the development of interbank and money markets,” the release stated.
Cambodia’s banking, finance and insurance industries suffer from a lack of confidence among investors and customers. Money is still hidden away in houses, and for many families, a savings plan includes buying gold rings.
In anticipation of the $30 million package, the ADB has been working with the financial sector for the past two years, providing assistance to the government and loans to rural populations through the Rural Development Bank, Malik said.
The schedule of three loan disbursements over the next 10 years means a long-term commitment by the ADB, Malik said.
The government will receive an eight-year grace period on the repayment of the loan, during which time 1 percent interest will accrue.
The loan will have to be repaid over a 24-year period with a 1.5 percent interest rate after the grace period, the release stated.
Finance officials could not be reached for comment Sunday.
Critics of the Finance Ministry say programs suffer because officials are more experienced with state-run economies and will not relinquish control to a free-market system.