“For us, the economic crisis affected garment export, tourism, construction and real estate,” said Director-General Tal Nay Im said at a workshop on the nation’s banking system. “So the banks’ borrowers are facing a hard time paying back [loans] when they can’t earn from their businesses. That will cause [non-performing loans] to increase, and that’s a second-round affect that the national bank is worried about.”

The National Bank reported in June bad loans in 24 commercial banks had risen to 3.7 percent, about $2.4 billion, in 2008, up from 3.4 percent the year before.

But Tal Nay Im said the news was even worse through May, 2009, when non-performing loan figures reached 5.2 percent. The rate could reach as high as 10 percent by the end of the year, she warned.

The Foreign Trade Bank’s bad loan rate went from 30.7 percent in 2007 to 32 percent in 2008. Canadia Bank saw its number rise from 6.8 percent to 11.1 percent in that period. ANZ Royal Bank saw an increase from 0.4 percent to 2.6 percent in that period.

The National Bank report echoed annual reports of the International Monetary Fund and the World Bank, which warned of rising rates of non-performing loans in major banks.

Credit disbursement has also slowed, from a growth rate of 50 percent in 2008 to just 1 percent through the middle of this year.

“The banking systems are under threat,” Robert van Zwieten, director of the capital markets and financial sectors division for the Asian Development Bank, told VOA Khmer in a phone interview from his office in Singapore. “Marginally speaking, it is slightly weaker than it used to be. That’s what you would expect and that is not certainly usual.”

Van Zwieten said economic recovery will increase loan disbursement and lower the rate of bad loans. Meanwhile, the National Bank can play a key role, keeping an eye on banking operations, while banks themselves should be more careful in providing loans.

“Our bank works with big companies, and we have collateral,” said Gui Anvanith, managing director of the Foreign Trade Bank, which has the highest rate of non-performing loans in the country. “We will continue to be cautious and to strengthen the banking system.”

Tal Nay Im said the National Bank had followed up on an international evaluation to improve regulation and supervision.

(The original article is from VOA)

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According to the Moody’s statement, Moody’s investor services confirmed Acleda bank local currency deposit and issuer ratings of Ba1 with a stable outlook. The agency also held other ratings for the bank steady, giving Acleda a score of ‘D’ for financial strength rating, a foreign long-term deposit rating of ‘B3’ and a foreign currency long-term issuer rating of ‘B1”.

Im Channy, CEO and president of Acleda bank, said in news release that “we are naturally very pleased with this outcome as it shows that our bank withstood the rigorous scrutiny which we have been put under and have maintained our ratings at a time when so many other banks in the world have been downgraded.”

Christine Kuo, a Moody’s vice president and senior analyst said in the statement that “In light of Cambodia’s current situation and prospects, Moondy’s has concluded that the systemic support input for Cambodian bank rating should be changed from Ba1 to B1.”

“In light of Cambodia’s current situation and prospects, Moody’s has concluded that the systemic support input for Cambodian bank ratings should be changed from Ba1 to B1,” said Christine Kuo, a Moody’s vice president and senior analyst in the statement.

Acleda bank’s shareholders, including the local non-profit organization and international development banks and institutions to support the development of micro-financing or transition economies, are the International Finance Corporation (IFC), the private sector arm of the World Bank (WB) and European development institutions.

The leading commercial bank consist asset worth $692.9 million by 2008 and have gained 20 percent of market share. So far, there are 229 offices throughout the country.

“If Acleda bank can get the same ratings as before during this crisis, it is a good sign,” said Tal Nai Im, director-general of the Central Bank, quoting by the Cambodia Daily as saying.

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Emergency loans are available to banks facing liquidity constraints in the wake of the global financial crisis, but so far “none of the banks have applied for a loan,” according to Hang Chuon Naron, director-general of the Ministry of Economy and Finance.

“They aren’t facing a liquidity shortage,” he told VOA Khmer Friday. “There is no crisis among Cambodian banks.”

The International Monetary Fund and World Bank have both warned that at least three major banks in the country are facing liquidity problems, due to non-performing loans and dwindling deposits. None of the banks has been named.

The National Bank announced in January it had prepared a $100-million in short-term loans to aid banks with funding shortages, to help with unforeseen emergencies after the US financial crisis rippled through global markets.

None of the nation’s nearly 50 banks and other financial institutions applied for the temporary, three-month loans.

“Up to now we haven’t needed a loan from the National Bank, because we have already partnered with a strong shareholder,” said Cheap Tieng, chief of treasury and an international officer at Acleda Bank.

Chheang Meng Heak, an economist at the Royal University of Law and Economics, said there may be strict requirements and other complications in the National Bank loans, prompting institutions to look for loans from foreign banks instead.

(the original article is extracted from the VOA news)

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“For the first time, home financing will be available to middle- and lower-income Cambodians,” Talmage Payne, CEO of newcomer First Finance, told the Post on Friday. “We are going to offer a product that the other [microfinance institutions] are not touching – loans for house purchasing.”

First Finance is a joint venture between Phillip Capital Group and local individual investors. The Phillip Capital Group is a Singapore-based Asian financial house with operations in eight countries in the Asia-Pacific and Europe.

“We see largely younger Cambodians getting educations who really want to improve their lives. Many of them want to own their first home,” he added.

He said First Finance will offer long-term repayment loans – up to 15 years – with a competitive interest rate. “The medium loan size is US$14,000, and clients will be required to use the title of the house or apartment they are buying as collateral.”

The UN Development Programme said last month that more than 30 percent of construction projects “may have been placed on hold due to the global downturn”, while analysts have blamed a rise in nonperforming loans this year on the faltering property market.

Payne said that despite the current downturn in real estate, First Finance had not been discouraged to invest.

“The Cambodian economy will come back soon, so we want to be ready,” he said. “For those people that have the income and resources, it will be a good time to buy because it’s cheaper due to the downturn period.”

First Finance will expand to cities in Preah Sihanouk and Battambang provinces by 2010, said Payne.

Hout Ieng Tong, president of the Cambodia Microfinance Association and general manager of Hattha Kaksekar Limited, said Sunday that he welcomed the new institution.

“Most of the MFIs focus lending on small businesses rather than home buyers,” he said, explaining that more customers benefitted from loans given to micro-, small- or medium-sized enterprises rather than individual real estate buyers.

He said that Hattha Kaksekar planned to lend $30 million this year, but would not issue property loans.

Bun Mony, a board member of the Cambodia Microfinance Association and general manager of Sathapana Limited, said Sunday this was a new market for MFIs.

“First Finance will be an evolutionary institution, and its focus on loans for house purchases reflects the progress of the real estate sector in Cambodia,” he said.

(The original article is extracted 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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Cambodia’s commercial banks were not hit hardly by the world financial crisis because Cambodian banks do not depend on the foreign loans. Cambodia does not have its stock market.

Tay Nay Im, Director General of the National Bank of Cambodia, was quoted by the Cambodia Daily as saying that “I think this is a good sign, because when banks arrive here it means that the investors have confidence”

“They bring capital to the country, which helps our business community,” said she.

“Sacombank whose signs at its new branch sit covered in red sheets, has yet the NBC before its application is approved,” said Nal Im, quoting by the Daily.

“Opening of the bank of India’s first branch in the country was a positive sign at a time when most people are painting a gloomy,” said Saurey Ray, first secretary at the Indian embassy in Phnom Penh, reported newspapers.

“Many banks are coming at the moment, from Vietnamese banks to Korean banks. We are very thankful to the National Bank of Cambodia for all their help,” said Ray, adding that the opening of the branch is aimed at increasing India’s investments in Cambodia and, depending on its success, the bank will definitely be opening more branches.”

In an effort to tighten and strengthen the banking sector, the National Bank of Cambodia (NBC) has tripled the minimum capital requirement for commercial banks in Cambodia. Commercial banks reserves were raised from 50 billion riel (US$13 million) to 150 billion riel (US$36.5 million), and specialized banks reserves from 10 billion riel (US$2.5 million) to 30 billion riel (US$7.5 million).

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So, Cambodia will be able to become more vulnerable to money laundering because Cambodia is lax of enforcement of existing regulations, and remain ill-equipped to deal with the problem. The potential for money-laundering through casinos, drug trafficking and the large-scale real estate developments is concerned.

The London-based watchdog International Bar Association (IBA), a 60-year-old organization of more than 30,000 lawyers and 195 bar associations, has said in report that Cambodia needs to improve its laws to prevent money laundering.

Money laundering has a huge negative impact in economics as well as in society. If the money laundering has been done through the banking system, it will do destroy function of banking and financial system, and especially it leads to a loss of public confidence. Therefore, banking sector needs better to oversight and enforcement of regulations and protect the banking and financial system from the money launders and financial terrorists.

Due to the pressure from the United States to address terrorism funding, Cambodia opened the Financial Intelligence Office, which is responsible for tracking suspicious activities in the banking sector. The office is under empowerment of the Law on Anti-Money Laundering and Combating the Financing of Terrorism passed by the National Assembly in 2007.

After passing the law, Cambodian government hopes that the legislation will boost investors’ confidence in doing business in Cambodia and counter criticism that the country is a place for illegal financial activities.

“The legislation is an important legal instrument and foundation for thwarting and cracking down on any attempts of money laundering and terrorist financing in Cambodia,” said Chea Chanto, central bank governor, quoted by the Phnom Penh Post.

Phan Ho, the Financial Intelligence Office’s secretary general, was quoted by the Phnom Penh Post as saying as saying that the Kingdom’s largely unregulated gaming sector, which brings in hundreds of millions of dollars each year, is especially concerning. He added that people thinks Cambodia is an easy place to launder money because the government and banks here have been slower to address the problem.

Tal Nay Im, director general of the National Bank of Cambodia, was quoted by VOA as saying that “we have taken strong actions to strengthen the Cambodian banking law to fight against money laundering and terrorism funding.” She added that “each bank in Cambodia must respect the law, and if any bank is involved in money laundering or terrorism funding, it will face defamation and lose cooperation from international banks.”

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At the present, the banking sector in Cambodia is at a crucial juncture: many changes have taken place in the recent period, including the increasing depth of the banking system, the rapid expansion of the bank network through the establishment of new provincial and local branches and the growth of banking services through the introduction of ATMs, credit cards, debit cards, e-banking and telephone banking, ATMs recognized by fingerprint.

Automated Teller Machine (ATM) was introduced in Cambodia by Canadia Bank in June 2004. ATMs have boomed in the last few years in Cambodia’s banking sector. And ATMs have become more popular among banking clients because they offers a secure and easy access point for cash without fee for in-network usage.

ACLEDA bank, leading local commercial bank, so far installed 60 ATMs up from 20 ATMs in 2007. The bank plans to reach 100 ATMs by the end of this year.

In Channy, president and CEO of ACLEDA, was quoted by the Phnom Penh Post as saying that “Our ATMs have been installed in all parts of Cambodia,” adding that “Our long-term expansion strategy will include an expansion of our network to 500 ATMs and 240 branch offices nationwide.”

ACLEDA bank is the largest numbers of ATM cardholders with 190,000 out of 420,000 depositors of ACLEDA using ATM cards.

In Channy said that ACLEDA will install 1,000 point-of-sale (POS) terminals this year in order to make in-store purchases easier for its customers and hopes to have 3,000 terminals across the country within three years.

Early this year, ANZ Royal Bank launched a new mobile phone banking service in Cambodia in an attempt to allow its subscribers to send cash over their mobile phone. So far, ANZ bank has 127 ATMs, up from 91 in 2007. The bank expects to add only 10 more this year.

Canadia bank is the first bank to install ATM in Cambodia in 2004. Currently the bank has installed 48 ATMs throughout the country, up from 25 in 2007. The bank expects to reach 60 ATMs by the end of this year.

“We are connected with the new domestic switch called ‘Easy Cash’, which is linked with Mekong Bank, SBC and UCB, and we hope more banks will follow our path to make life easier for their cardholders by allowing them to use their cards in any ATM from any local or international bank,” Kunkanel Nong, marketing manager at Canadia Bank was quoted by the Phnom Penh Post as saying.

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According to the Cambodia Economic Watch, the rubber sector is expected to post a negative 2.6 percent growth rate in 2008 because old growth rubber trees have been replaced either by new trees that are still too young to produce raw rubber or other crops. Rubber growth is thus expected to remain flat in coming years.

Due to the effect of the world economic slowdown, the price of dry rubber has declined to US$ 1,300 per ton in the international market and US$ 1,200 per ton in the domestic market, but the price of bottom line for Cambodian rubber planters was US$ 700 per ton.

According to the official figure, Cambodia has 110,000 hectares of land to plant rubber trees. And the number is expected to increase up to 150,000 hectares in 2015.

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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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