Cambodia's lending industry has started showing some signs of strain due to collateral confiscations and defaulted loans but a consideration of South Korea's financial inclusion model could help resolve lending issues and boost economic growth.
Reports have emerged about misunderstandings that revolve around the Cambodian lending market. Some rural villagers reportedly do not understand loan terms and conditions while others are bound to unreasonable interest rates and unjustifiable terms.
Shin Chang Moo, president of PPCBank, shared with Khmer Times how he witnessed firsthand the development of South Korean following the Korean War. Shin said the country experienced a generational shift that included the government encouraging financial literacy among its people.
The South Korean government partnered with banks and financial institutions in promoting financial literacy in schools. The joint ventures aimed to push for young students to open savings accounts as early as possible.
"Piggy banks were distributed in schools, prompting students to collect loose change to feed the piggy banks. Every month, banks went to schools to help pupils open savings accounts. They were very active as they needed deposits to grow their funds," Shin explained.
As if echoing South Korea's move, the National Bank of Cambodia (NBC) teamed up with the Education, Youth and Sports Ministry in a bid to include financial management, loans, and savings to the Cambodian educational system this year.
Late last year, the NBC introduced an app for young students that helped inculcate fundamentals of finance-related topics in rural villages. The app also reads stories that tackled financial setups in Cambodian villages.
Maybank Foundation chief executive officer, Shahril Azuar Jimin said the foundation trains people and helps them open bank accounts. He noted that those who didn't have accounts in the past now have their own savings accounts as part of the Cambodian government's efforts in boosting the country's development.
Meanwhile, Cambodia's economy is expected to grow steadily in the coming years, the ASEAN Briefing said in its Cambodia's Investment Outlook for 2019 report. While the Asian country struggled in the 20th century, it is recovering and has become a suitable investment destination for many investors.
Last year, a number of industries showed steady growth including the tourism sector that saw an 11 percent increase in inbound tourists visiting the country. The clothing market also expanded, thanks to the relocation of some firms from Bangladesh and China.
For 2019, analysts predict that the Cambodian economy will grow at around 7 percent. This is the same growth rate that the country recorded over the past few years. The garments industry is believed to be a key driver for growth in Cambodia despite energy supply challenges along the way.
