Asean and Cambodian government officials urged regional banks to seriously consider financing projects in the Cambodian private sector during a two-day Asean banking workshop held in Phnom Penh this week.
Ong Keng Yong, Asean’s Singaporean secretary-general encouraged wealthier Asean nations such as Thailand, Singapore and Malaysia, to invest in the association’s poorer members: Cambodia, Laos, Burma and Vietnam.
“All Asean members need to seek prosperity for all their neighbors, rather than the rich alone,” Ong Keng Yong said Tuesday, adding that Cambodia is a great place for investment opportunities.
Pung Kheav Se, chairman of the Association of Banks in Cambodia, asked foreign bankers to co-finance projects with local banking partners. Very few foreign institutions directly finance the Cambodian private sector despite strong economic growth and an impressive increase in bank loans and deposits in 2006, he said.
Tal Nay Im, director-general of the National Bank of Cambodia, said that bank loans went up 46 percent last year, from $603 million in 2005 to $882 million, and that customer deposits increased 45 percent, from $963 million in 2005 to $1.4 billion. Moreover, net total assets of the country’s banks jumped from $1.37 billion in 2005 to $1.9 billion last year—an increase of nearly 39 percent.
Chea Chanto, governor of the National Bank of Cambodia, said that because of the widespread use of US dollars, only 3 percent of the bank deposits and loans were issued in riel. This is advantageous to newcomers in the banking sector as they do not have to worry about currency exchange risks, he said.
The growth in loans and deposits has outstripped the market share of the country’s two largest banks, Acleda Bank and Canadia Bank, Chea Chanto said. This means that the banking sector is growing fast enough to accommodate the participation of more banks, he said. “In other words, the cake is growing faster than the appetite of any of the participants.”
Tann Monivann, vice president of the Mong Reththy Group, said by telephone that getting loans for agricultural projects still is very difficult. Banks focus most of their lending on real estate purchases where quicker returns are expected, he said.
Local banks tend to issue loans with annual interest rates of around 12 percent, Tann Monivann said, adding that this is prohibitively high.
“We are only capable of borrowing money with an interest rate of less than 6 percent per year,” he said.
Nang Sothy, director-general of the Phnom Penh Special Economic Zone Investment Co Ltd, said that high interest rates and insufficient legal protection for borrowers were proving major problems for local businesses. A lack of banking regulations opens the loan process to nepotism and favoritism.
“Laws and regulations, low interest rates and large loan amounts are necessary for local investors,” he said.