The phone provider is allowing users to top up at ANZ Royal’s ATMs in Phnom Penh, a press release stated. The service is also provided by market leader Mobitel, a spokeswoman said.

“This is part of our strategy to offer to our subscribers multiple ways of recharging their accounts,” stated Smart Mobile CEO Thomas Hundt, in an email Monday.

The move is the latest within the Kingdom’s highly competitive telecoms sector to team up with the banks to offer increasingly diverse services and reach new customers. Smart Mobile, together with Hello and Mfone, already work with ANZ subsidiary Wing Cambodia to provide mobile banking – a service that enables people to transfer money via text message.

Mobitel, owned by the Royal Group, is in the process of launching its own mobile-banking initiative called VLOAD, under development with Refresh Mobile.

According to Hundt, cooperating with the banking sector can offer mobile customers more convenient ways to interact with the firm.

“Cambodia’s banking sector is developing fast. More and more people have bank accounts and make their transactions through banks,” he wrote.

The company is developing further links with the banking sector, after offering a similar service with ACLEDA bank since September 2009.

“We are already in progress of implementing the scheme with more banks. Contracts with two more banks have concluded already and under implementation, and we are looking beyond that for more banks to work with,” Hundt wrote.

ANZ Royal Bank also praised the agreement reached with Smart Mobile.

“We are proud to provide our customers with another convenient service, helping to bring more international banking standards to Cambodia,” ANZ Royal Bank CEO Stephen Higgins stated in the press release.

Smart Mobile customers can top up at ATMs in Tuol Kok, the riverside area, Olympic Stadium, Pet Loksang, Phsar Doem Thkov, Stung Meanchey, Toeuk Thla, Chaom Chao, Takhmao and Chbar Ampov.

Source: The Phnom Penh Post

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Chea Chanto, governor of the National Bank of Cambodia, was quoted by the Phnom Penh Post as saying that “Currently, banks in Cambodia dare not grant long-term (five- or 10-year) loans to businesses because they are worried about losing their money, and this is an impediment for entrepreneurs to expand businesses and-small-and-medium enterprises (SMEs),” adding that “the draft law on financial leases will enable businesses and SMEs in Cambodia to obtain a long-term source of capital from the banking and financial system with limited collateral.”

Stephen Higgins, CEO of ANZ Royal Bank, said that the banking structure in Cambodia leaves too much risk for banks to handle a large lease portfolio, reported the Cambodia Daily.

Chea Chanto explained that financial leases refer to the leases of assets and properties over the long term, between a lessor (a licensed bank or lease company) and a lessee (a developer, manufacturer or other customer). He added that financial leases could include properties such as machinery and all kinds of equipment, but excluded land and buildings, reported the Phnom Penh Post.

Jim Swander, an independent financial consultant, said that the new leasing law will not help as many small and medium enterprises as some might think, reported the daily.

“In some ways it’s a good move, but it isn’t going to help the people it was designed to help,” said he. He added that leases can be more risky for banks because leased items can be moved or stolen, unlike real estate, which is often used as collateral in loans.

Yim Sovann, Sam Rainsy Party parliamentarian, said he supported the law. “I appreciate the government for creating this law, as the country is suffering from the global financial crunch,” he said. “It will help develop Cambodia’s SMEs, which contribute about 65 percent to GDP and employ 85 percent of the entire workforce,” reported the phnom penh post.

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This move showed Phnom Penh was clearly out of sync with the world’s major financial centres and impervious to the credit crunch that had forced New York, London, Paris and Tokyo into unprecedented crisis.

In a clear sign of Cambodia’s lack of integration into the global financial community, the National Bank of Cambodia (NBC) was taking measures to rein in a rapidly increasing money supply even as much of the developed world was trying desperately to increase liquidity.

Although Cambodia’s financial sector had escaped direct impact from the financial crisis – which hurt developed Asian economies such as South Korea – it was exposed to threats.

“Cambodia’s banks are not exposed directly to the fallout from the build-up of toxic assets in Western banks,” said the Economist Intelligence Unit (EIU) in its April outlook for Cambodia. “But they are vulnerable to domestic problems, including the recent bursting of the property bubble and the general downturn in the economy owing to the global slowdown.”

It was not the first time vulnerabilities had been pointed out. Following IMF consultations with Minister of Economy and Finance Keat Chhon and National Bank of Cambodia Governor Chea Chanto in Phnom Penh from late October to early November last year, the International Monetary Fund noted that the global crisis “has exposed vulnerabilities among Cambodia’s banks and is beginning to affect their financial soundness”.

When the financial crisis began to spread across the globe, Cambodian banks had continued to operate in their own world.

As lending continued to increase, in large part driven by heady returns in a booming property market, loans began to catch up with the strong deposit growth of recent years.

Lending overstretched
The IMF warned that the loan-to-deposit ratio had reached 100 percent in October, up from just 68 percent a year earlier with “a move toward more risky lending activities”.

Suddenly, South Korean construction companies, scared off by the worsening economic situation, withdrew their money and left, the IMF said, even as mortgage lending and consumer loans were expanding.

Non-performing loans (NPLs) were also being under reported: “Mid-year audits by the National Bank of Cambodia revealed NPLs [as a share of loans] higher by two percentage points than previously reported by banks,” the IMF said in February.

At the end of 2008, the EIU noted that outstanding stock of credit to the private sector had increased 54 percent over the year to 9.9 trillion riels (US$2.4 billion).

It has awarded Cambodia’s banking sector a CCC credit rating, which Fitch Ratings classifies as “a current perceived possibility of default”. At this level of risk Cambodia’s banking sector is considered to have a high level of outstanding credit given that other CCC-rated countries saw a median increase in credit over the year of just 23.8 percent, or less than half the rate of growth in Cambodia, the EIU said.

In its February report outlining these underlying problems, the World Bank noted that “two large banks” were threatened by NPLs while the IMF went further shortly afterwards, noting that “several large [banks] could face a large deterioration in credit quality and a need for recapitalisation”.

Both organisations have repeatedly refused to identify the banks in question, with International Monetary Fund resident representative John Nelmes reiterating that the IMF “does not discuss or speculate about individual banks”.

What is certain is that borrowing growth has fallen and NPL rates are up. Canadia Bank saw NPLs rise to 2.35 percent last year from less than half a percent the year before, according to bank data. The microfinance sector at the end of the first quarter said bad loans would rise to more than 1 percent this year.

“According to official data, the ratio of NPLs to total outstanding loans edged up slightly in 2008, to stand at 3.7 percent at the end of year,” the EIU said last month. “Non-performing loans will rise in 2009-10, although official data may not reveal the true extent of the problem.”

Cambodia’s high exposure coupled with a perceived lack of openness meant the financial system was beginning to attract negative attention, adding to underlying weaknesses.

“Confidence is obviously a key issue, and banks will be reluctant to reveal the true extent of non-performing loans if the situation is bad/worse than previously thought,” the EIU’s Cambodia analyst Danny Richards said in an email Wednesday. “However, an opaque banking system is also a breeding ground for rumour and negative speculation.”

The EIU has slowly increased its risk rating for Cambodia, from 68 out of 100 in December to 69 in January and up to 70 last month, the highest level in the past two quarters.

With loan-to-deposit ratios narrowing, banks are now looking to increase deposits, offering high rates to attract customers – the fixed deposit 12-month rate on dollars at Advanced Bank of Asia was 8 percent this week, ACLEDA was offering 7 percent, and May Bank, the lowest on the market, was offering 3.75 percent.

“The kicker is, higher deposit rates ultimately lead to high loan rates, which become a ‘tax’ on businesses and consumers,” James Lowry, ANZ Royal Bank’s head of corporate and institutional banking, said Thursday. “If borrowers’ capacity to service loans is impinged by higher interest rates, then people tend to borrow less or be restricted in how much banks will lend them, thus impacting lending activity.”

Cambodia found itself caught between a rock and a hard place. At the same time as banks faced narrowing loan-to-deposit ratios and mounting exposure to bad loans, domestic firms, and developers in particular, were crying out for financing as the economy teetered on the edge of recession. Where banks were willing to lend at all, money was not going cheap.

Many other countries have seen interest rates plummet – the US benchmark rate has been lowered to below 0.25 percent, Thailand’s rate has been slashed four times since December, and the Eurozone rate was predicted to be lowered to 1 percent this week, AFP reported.

In Cambodia, this has not been possible. Where other countries had been able to adjust interest rates to calibrate a response to the unprecedented failings of the global financial system, Cambodia’s dollarised economy meant that the NBC did not have the same tools at its disposal.

“The NBC lacks most of the conventional monetary instruments that other central banks have. Currently they use reserve requirements and intervention as their main monetary policy tools,” Nelmes told the Post in March.

Central bank response
As it became clear that Cambodia’s economic growth was beginning to decline, the NBC reacted in January by widening money supply, lowering the reserve requirement by 4 percentage points to 12 percent to boost liquidity. This time, it also introduced measures to improve oversight of loan quality, drawing praise from the IMF for its handling of the complex problems facing the financial sector.

A decrease in the reserve rate, a new temporary overdraft facility for banks suffering from dangerously low liquidity, increased supervision and improvements to the lending provisions system mean the central bank “deserves to be commended for strengthened efforts at managing the risks”, Nelmes said Thursday.

“A next step will be to introduce reforms that help to build an inter-bank market, so that banks can more easily trade liquidity among themselves to manage their liquidity needs.”

The question remains whether these measures will be sufficient to stave off the worst of the impact of the crisis on the domestic banking system.

A spate of balance sheets for 2008 released last month by Cambodia’s private banks showed nothing untoward, but it may not be until 2009′s results are released next year that we see the true impact of the crisis given the largely hidden nature of the underlying problems thus far.

“The lack of openness is clearly worrying – potentially storing up greater problems in the future in terms of taking action to clean up balance sheets,” said Richards.

(The original article is extracted The Phnom Penh Post)

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This grant will help support financial literacy, increase income opportunities and provide millions of dollars worth of savings for Cambodians living in rural areas, said Margaret Adamson, Australia’s ambassador to Cambodia.

“With this grant, WING will be able to extend its service to rural areas where it would otherwise not have operated,” Adamson said.

“Wing will provide approximately 8 million rural Cambodians with the opportunity to access affordable and convenient payment services.”

Brad Jones, managing director of WING, said that WING is available across 17 provinces and hopes to continue its expansion with the Australian grant.

“We will use this grant to extend our services to Laos and other Cambodian rural areas,” Jones said.

According to Adamson, WING’s technology has the potential to save 100,000 rural Cambodians $3 million in transaction costs when the mobile money transfer technology is used instead of traditional methods of transferring cash, often by taxi.

Currently, Wing has around 200 “Cash X-press” agencies, 120 of which are in Phnom Penh.
Earlier this month, WING partnered with mobile operator Hello.

It is also currently in discussion with other telecommunications companies to extend its services across multiple networks.

The original article is extracted from the Phnom Penh Post

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Yin Virak, ACLEDA vice president and head of the bank’s International Department, said the bank’s loans had more than doubled from US$1.2 million to $3.32 million in Laos, while deposits were up 83 percent, rising from $1.5 million to $2.7 million in the last quarter. He added that the bank now had 2,034 depositors and 699 borrowers, which rose from 1,234 depositors and 253 borrowers at the end of last year.

“We have been successful due to our experience in Cambodia,” he said Tuesday. “The success has … relied on the support of the Laotian government, which has urged people to borrow money,” he said.

Kengchai Sixannon, first secretary of the Laotian Embassy in Phnom Penh, said Tuesday that the presence of ACLEDA Bank was a clear sign of growth in the Laotian banking sector.

“Now there are a lot of Laotians taking out loans from ACLEDA Bank to enlarge their businesses, and it has also created more jobs for local people,” he said.

Acleda launched its Laos operations in July 2008 with the establishment of a head office in Vientiane, followed by additional branches in Champassak and Savannakhet provinces.

(The original article is extracted from The Phnom Penh Post)

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Has the crisis slowed Vattanac Bank’s progress? Do you plan to lay off staff or reduce recruitment to cut costs?

The economic crisis has created a challenging environment for banks in Cambodia, as it is important to maintain good asset quality and satisfactory liquidity.

Our bank has a satisfactory liquidity position, so there are opportunities for the bank to develop further. As of December 2008, Vattanac Bank had a staff force of 119.

Today, that stands at 133 and we are looking to hire more staff for our credit card business and to support expansion plans.

How many loans did the bank issue in 2008 and what was the change from 2007? With the crisis affecting Cambodia, what are your growth expectations for 2009?

Loans increased by US$21.9 million in 2008, up 27 percent compared to 2007.

For the same period, deposits increased $50 million, up 49 percent. For the challenging economic environment in 2009, we will emphasise maintaining the quality of our loans.

How many customers does the bank have so far, and what is the change from last year?

Up to the end of December 2008, we had 11,137 customers compared to 7,920 in 2007.

We have been encouraged by the strong support we have received from the public.

Late last year, the National Bank of Cambodia (NBC) tripled the registered capital requirement for commercial banks from $13 million to $37.5 million. As a banker, what do you think about this decision?

As of December 2008, our shareholders’ funds stood at $32.06 million and we are committed to meeting the new capital requirement as required by the NBC.

We are supportive of the NBC’s decision, as we recognise the importance of higher capital to support the bank’s business expansion.

Cambodia has 24 commercial banks. Do you think the number is too high?

Every bank has its own focus and business direction. If the bank is well-capitalised and able to develop its own niche market, it has good prospects…. I feel that the NBC is in good hands under the capable leadership of Chea Chanto and its many senior officials.

The NBC recently took the positive step of easing liquidity by reducing the statutory reserve requirement to 12 percent.

What is your vision regarding the banking industry this year given the financial crisis?

Due to the vicious nature of the economic crisis, many economic sectors in Cambodia will be considerably weakened.

As such, I expect this year will be challenging for the banking industry.

(The original article is extracted from the Phnom Penh Post)

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Vattanak bank which operated since 2002 with a $13 million investment has two branches- one in Phnom Penh in 2002 and other in Siem Reap province in 2005. The bank had the total assets of $190 million at the end of 2008, with total lending of $103.89 million.

The Bank provides the full range of retail and commercial banking services including, deposits, loans, trade services, trade financing, remittances and foreign exchange. Its client portfolio is diversified and includes individuals, businesses, NGOs, large local corporations, multinationals and embassies.

According to a National Bank of Cambodia annual report released in 2008, the Vattanac bank ranked 8th in terms of assets of Cambodian banks.

Chan Kok Choy, general manager of Vattanac bank, said that the economic slowdown, which caused a 25 to 30 percent plunge in property values, has not given the bank any-performing loans, reported the Cambodia Daily.

He added that his bank has focused on, as its niche, loans for apartment buildings in places like Boeng Keng Kang I commune and small to medium enterprises, hotels and other businesses.

The Bank’s headquarter with a 38-story skyscraper is building on Monivong Monivong Boulevard near Acleda Band’s headquarters and the 30-story Canadia Bank building.

Beside the investment in Bank, the bank’s owner, Sam Ang, also have stakes in real estate companies, an industrial park, and Cambodia Brewery Limited – Anchor beer and Tiger beer.

The International Monetary Fund (IMF) criticized the bank of Cambodia for its weak supervision by the National Bank of Cambodia in the increase in the vulnerability of banks and more controls are needed to help banks manage rising amounts of risk.

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The IMF blamed “slowing external inflows” for the reduction in free capital in the banking system despite recent efforts by the National Bank of Cambodia to ease the liquidity situation, including a reduction in the reserve requirement from 16 percent to 12 percent from February 1.

“The [IMF] mission and authorities also agreed that some scope remained for further monetary easing in 2009 as inflation pressures ease,” said an IMF statement.

The main liquidity adjusting option available to the central bank, sector sources say, is to bring down the reserve limit further in a bid to reduce redundant capital in the system.

“They [the authorities] could go back to eight percent,” said John Brinsden, vice chairman of ACLEDA Bank, referring to the central bank’s reserve requirement prior to late July, when it was doubled to 16 percent to stave off inflation and excessive lending.

Anthony Galliano, head of corporate and institutional banking at ANZ Royal, wrote in the Post last week that “a further [reserve rate] reduction would be greeted positively by banks that would welcome additional liquidity to lend into the economy”.

This is one of the few options available to increase liquidity in a dollarised economy such as Cambodia’s, he added.

Measures limited
While the IMF described January’s lowering of the reserve requirement to 12 percent from as an “improvement”, Brinsden said that in practice the change had resulted in few practical benefits due to other liquidity-curtailing measures imposed by the central bank.

Private banks are now required to maintain a certain level of liquidity on individual currencies, he said, rather than an overall liquidity ratio, meaning that banks cannot offset different currencies against each other.

Also, “banks have been running more liquidity than they normally would to be on the safe side”, Brinsden said.

The central bank at the end of January enacted a measure affording banks with short-term liquidity problems a new overdraft facility that the IMF welcomed as a “substantive” action to help address Cambodia’s liquidity concerns.

(The original article is extracted from The Phnom Penh Post)

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The main threat, sources said, stems from the decrease in available capital as foreign backers trim their emerging market investments, leaving microfinancers less able to serve local demand.

Prior to the global economic downturn about 50 foreign banks were lining up to lend to local MFIs, said Bun Mony, a member of the board of the Cambodian Microfinance Association (CMA) and general manager of the MFI Sathapana Limited.
But since the onset of the crisis, he said the number had fallen to zero.

“A large number of microfinance institutions have been seriously affected by the global financial crisis because 80 percent of our capital is from abroad,” Bun Mony said.

He said portfolio loans to customers increased by 61 percent last year, “but we forecast that growth will slow from 10 to 20 percent this year”.

Other MFIs, including AMK Microfinance and ACLEDA, told the Post they also expect some growth in 2009, albeit below original expectations.

Bun Mony also warned that interest rates – currently at two to three percent per month – could rise in response to loan restrictions by foreign creditors.

“If we want to take out new loans, we have to pay one or two percent more per year, so we are hesitating to borrow. We may have to raise local rates more to make up for our higher costs,” he said.

CMA Chairman Hout Ieng Tong said the number of MFI borrowers hit one million last year, up from 970,152 in 2007. He said loans totalled US$740 million, consisting of $438 million from 17 microfinance institutions, with the rest from ACLEDA Bank.

Hout Ieng Tong said the number of depositors rose to 529,789 last year from 355,956 in 2007, with $492 million in deposits, excluding ACLEDA.

“The portfolio risk is still very low,” he said, estimating 0.67 percent risk, or $2.95 million.
Bun Mony said there had been instances of collateral such as land and houses being seized for auction to repay debts, but he said less than one percent of loans were nonperforming.

ACLEDA President In Channy said Thursday that local deposits at ACLEDA Bank had increased to $512 million, with $463 million in loans outstanding.

“Nonperforming loans at ACLEDA were 0.4 percent last year,” he said. “We lend to farmers without requiring land or houses as collateral, but third parties insure the borrowers.”

But Tal Nay Im, director general of the National Bank of Cambodia, said she was worried that farmers were at risk of losing their assets if they defaulted. “They risk being deprived of their houses, but it is their only choice if they want to borrow money,” she said.

(The original article is extracted from the Phnom Penh Post)

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As gas approached 5,700 riels ($1.36) per litre, commuting in a vehicle was too expensive.

With food prices rising sharply, there was concern that discretionary income would not be able to support basic needs, potentially leading to unrest.

Property prices in Cambodia were continuing their serial rise, up 60 percent in 2006, 80 percent in 2007 and 30 percent in the first quarter of 2008.

Speculators were flipping real estate with quick profits, which were partially funneled back in the economy, sometimes into luxury goods, but mostly into the next potential property flip.

In May of 2008, the National Bank of Cambodia (NBC), mindful of the sobering reality of sharply rising inflation and its damaging impact on the economy, doubled the reserve requirement to 16 percent. The reserve requirement is one of the few tools available to the NBC in managing monetary policy in this dollarised economy. It allows the central bank to influence the amount of liquidity in the banking system.

The reserve requirement is a percentage of deposits that must be deposited in the central bank and is therefore unavailable to the bank to lend. The higher the rate, the less banks have available to lend.

As banks were dramatically growing their lending portfolios in 2007 and 2008, a good deal of credit was fuelling property investment and contributing to a home-grown real estate boom. The NBC also restricted real estate lending. Higher reserve requirements and limits on real estate lending helped stall real estate prices and control inflation.

Growing Crisis
Unfortunately, the economy started to come under pressure as the global environment deteriorated. What at first looked like a deep recession has now gone beyond that, causing concern that in 2009 we may very well enter a depression.

Over the last year, property prices have declined and have severely impacted vehicle and jewellery sales. Liquidity in the property market has vanished and construction curtailed, impacting building supplies companies. The global contagion has hit the garment industry, and tourism is falling.

In January, the NBC cut the reserve requirement from 16 percent to 12 percent and lifted property lending restrictions. The intent is to stimulate lending, increase liquidity and boost growth. Lower reserve requirements may make over US$80 million available to banks to lend back. While this is a welcome move, other factors will limit the impact.

Falling property prices and tight liquidity means that speculators are holding positions that are likely unprofitable and difficult to sell. Some property investors borrowed heavily and are struggling to make loan repayments.

Creditworthiness has deteriorated, especially in construction, building materials, hospitality and real estate.

Banks will be more inclined to lend to industries that are less affected by the slowdown. Bank deposits are falling as media report global bank nationalisations and huge losses, leading some depositors to resort to the mattress even though Cambodian banks are not exposed to subprime loans.
Fewer deposits means less liquidity and less available to lend.

Finally, the global economic crisis has truly spread, and while lower reserve requirements will partially offset the impact of the crisis, Cambodia is unlikely to avoid a contraction in the economy.

In 2009 the world will experience economic conditions of historical proportions, not seen in generations. Global governments are mustering every tool to confront the crisis and attempting to contain it.

The Cambodian government has announced some measures and recognises that no country is immune. The reserve requirement reduction will help contain the economic difficulties, and a further reduction would be greeted positively by banks that would welcome additional liquidity to lend into the economy.

(The original article is extracted from The Phnom Penh Post)

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