Wednesday, 17 August 2011

Current Development of Banking and Financial Sector in Cambodia


Above: the National Bank of Cambodia. Below: tourists can find the ATM machines everywhere in Phnom Penh





The development of the banking and financial sector in Cambodia is generally viewed as a success with the recent progress of modern banking and micro-financial institutions. Recently, with the recent establishment of Cambodia Stock Exchange (CSX)  in July 2011 in which a series of laws and regulations (Law on the Issuance and Trading of Non-Government Securities, Law on Government Securities, Law on Financial Leases) have been adopted in preparation of the opening the new bourse with a common aim of banking and financial development, Cambodia is trying to enter the phase of modernization of its financial sector. The National Bank of Cambodia (NBC) is the central bank which has dual roles of banking regulation and supervision. The first and foremost priority of the NBC is to ensure macroeconomic stability and financial stability (NBC, 2008). It goal is to maintain price stability in Cambodia.

To better understand the development of banking and financial sector in Cambodia, we should take a look into its history. In the 1990s, the banking sector in Cambodia started to thrive with the introduction of the free market economy. Then, the privately owned commercial banks and foreign bank branches/subsidiaries started to appear gradually one by one. From 1998–2001. According to the new banking law, each commercial Bank must have a minimum start-up capital of 50 billions Riel (approximately $13 million). Major reforms to the banking system introduced under new Governor H.E. Chea Chanto. New banking law classifies financial institutions into three categories: i) Full Commercial Banks with a minimum paid-up capital of $13 million, ii) Specialised Banks – minimum paid-up capital of $2.5 million, and licenced/registered Microfinance Institutions (MFIs). This reform has resulted in significant increase of financial sustainability and confidence level of depositors and investors. Due to structural reform in the financial sector, the number of commercial banks was decreased considerably, but micro-financial institutions emerged and began to grow rapidly. From 2002 to Present, Reform process continues. Recently the National Bank of Cambodia decided to keep the reserve requirment rate at 12% for all financial institutions. However, the banking system initially suffers from over-liquidity and lack of quality borrowers. Now, Cambodian people and tourists enjoy the good service of the banking sector, which now has 29 commercial banks and 6 specialized banks (Association of Banks in Cambodia, 2011). ATM machines are almost everywhere in Phnom Penh and other tourist citys such as Siem Reap and Sihanoukville.

The establishment of the Cambodia Stock Exchange (CSX) in July 2011 by the Government is a milestone progress for modernization of the financial sector in Cambodia. The trading operations will soon begin by next year. Undoubtedly, these achievements are contributed by Securities and Exchange Commission of Cambodia (SECC), Ministry of Economy and Finance, and Cambodia’s central bank, the NBC, with its prudent policies and regulations, and the government’s steadfast adherence to the market, freedom from exchange controls and unrestricted capital movements. However, along with this optimism, there are also a lot of concerns and criticisms on the opening of stock market in Cambodia since the global economy has just started to recover from the financial crisis and Cambodia’s hesitation and insufficient regulatory framework (lack of e-commerce law, etc.) and lack of human resource in the financial and IT sector.

Other articles on Cambodia: 

    (5 March 2014)


    (17 October 2011)

    (03 October 2011)

    (12 September 2011)

6. Review of Cambodia's Economy and Finance (up to 2011)
    (31 August 2011)

     (22 August 2011)

    (17 August 2011)

    (17 August 2011)

    (16 August 2011)

      (15 August 2011)



      (15 August 2011)

5 comments:

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