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ADB Approves Third Subprogram Loan for the Development of Cambodia's Financial Sector

MANILA, PHILIPPINES (7 October 2005) - The Asian Development Bank (ADB) has approved the third subprogram loan of US$10 million under a Financial Sector Program for Cambodia. The Financial Sector Program comprises three subprograms of US$10 million each. The first subprogram was approved in November 2001, and the second in November 2002.

Cambodia's nascent financial system has been a constraint faced by the Government in achieving its development objectives. The Program was therefore designed to promote the development of a sound, market-based financial system that supports resource mobilization and sustainable economic growth.

"The country's financial sector has made significant progress since the Program began. There is greater financial stability, increased financial services and indications of growing confidence in the sector," according to Samiuela Tukuafu, an ADB Financial Specialist.

The achievements of the first two subprograms and the Government's growing capacity to implement reforms justify continued support under the third subprogram.

The third subprogram will help the Government adopt a secured transactions law, establish a public registry for secured transactions and establish a financial intelligence unit. The enactment and dissemination of new commercial laws, and the training of judges and lawyers in their implementation, are activities also planned under the subprogram. Legislation on negotiable instruments and payment transactions will be adopted to prepare the foundation for inter-bank and money markets.

The subprogram will strengthen the supervision of the insurance subsector and enhance the competitiveness of the insurance market. Similarly the training of professionals to meet international accreditation requirements in accounting and auditing will be supported.

ADB has also approved a $500,000 technical assistance grant to support the National Bank of Cambodia, the Ministry of Economy and Finance, and the Ministry of Commerce in implementing the various policy and institutional reforms under the third subprogram.

ADB's loan will be drawn from its Asian Development Fund. It carries a 24-year term, including a grace period of 8 years, and an interest rate of 1% per annum during the grace period and 1.5% per annum thereafter.

The National Bank of Cambodia will continue to be the executing agency. The third subprogram will be implemented over a period of 18 months.

The Asian Development Bank is dedicated to reducing poverty in the Asia and Pacific region through pro-poor sustainable economic growth, social development, and good governance. Established in 1966, it is owned by 64 members, with 46 from the region. In 2004, it approved loans and technical assistance totaling $5.3 billion and $196.6 million, respectively.

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