The National Bank of Cambodia said Tuesday that the total amount of deposits in the nation’s commercial banks increased last year by 12.5 percent—evidence, they say, of growing public confidence in the banks.
Phan Ho, NBC director of bank supervision, said Tuesday that total deposits in Cambodia’s 17 commercial banks reached $800 million in 2004, up approximately $100 million from 2003.
“The Banking Law has increased client confidence,” he said, referring to the 1999 Banking Law, which went into effect in 2001 and required banks to have $13 million of capitalization.
Phan Ho said that loans increased last year to about $400 million, up from about $250 million before the banking law went into effect.
Phan Ho said that depositor confidence will increase after mid-2005 when all banks will be required for the first time to publicize their financial statements. Banks have made regular reports to the NBC since the banking law went into effect.
NBC Director General Tal Nay Im said Monday that a deposit insurance program like those in developed countries is slated to be developed by the end of 2007.
“For Cambodia, the depositor may pay some fee to insure their money,” she said.
The Asian Development Bank and International Finance Corporation have said recently that the amount of available credit is still very low compared to deposits. They say the lack of lending, especially to small- and medium-sized businesses, has been a serious constraint on economic growth.
Adam Sack, General Manager for the IFC’s Mekong Private Sector Development Facility, said this week that while low levels of deposits are a factor, there is also a lack of needed legal reform.
“The other constraints are more binding,” he said. “The constraints include the risks of lending due to lack of enforcement of contracts and problems with land titles.”
The ADB Country Strategy for 2005 to 2009 notes that credit growth has been inhibited by “inadequate mechanism to support the enforceability of contracts, lack of reliable borrower information, high operating costs, low levels of transparency and weak human resources capacity.”
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