NPL in banking and microfinance sectors manageable in 2023


The inability to make a loan repayment to debtors so-called Non-Performing Loan (NPL) in the banking and microfinance sectors of Cambodia is expected to stay at a manageable level in 2023 even though NPL increased slightly after the loan restructuring policy was withdrawn at the end of June 2022, said local bankers.

In Channy, President & Group Managing Director of Acleda Bank Plc—Cambodia’s stock exchange-listed commercial bank, told Khmer Times last week that his bank and other banks in Cambodia had complied with the exit strategy to safeguard financial stability and rebuild policy buffer for future needs, which made NPL rise slightly in late 2022 compared to 2021.

“After a hard time, we had to assess the quality of assets clearly by implementing the rules to classify the restructured loans from one category to another and this arrangement raised the NPL a little bit. So, this year would not be hard again because we already arranged the loans last year and most loans have turned healthy back and so they are classified as normally performing loans,” said Channy.

Sok Voeun, chairman of Cambodia Microfinance Association (CMA), also told Khmer Times last week that people in the microfinance industry believed that the NPL would be manageable with sustainability in 2023 even though slightly increased to around 2.5 percent by end of November 2022 after it after the loan restructuring policy ended.

However, Stephen Higgins, Managing Partner of investment and advisory firm Mekong Strategic Partners, told Khmer Times that the NPL had started to rise quite remarkably in the second quarter of 2022 and is most likely to accelerate in the first half of 2023 before moderating a little in the second half of this year.

“The NBC policy of allowing loan restructuring stopped a deeper economic downturn during the pandemic, so it was absolutely the right thing to do, but it also meant that some problems have just been deferred until today, and that’s what we’re seeing,” said Higgins, who has more than two decades of experience in banking and financial services.

The credit to private sector, which was disbursed to various main economic sectors, increased by 21 percent while consumer deposits rose by 11.3 percent, according to the latest macroeconomic and banking sector report released last week by the National Bank of Cambodia (NBC), adding that prudential regulations have been strengthened gradually in line with domestic economic recovery and its exit strategy.