ADB Lends Cambodia $15 Million for Financial Sector Reforms

PHNOM PENH, CAMBODIA – Cambodia and the Asian Development Bank (ADB) today signed a loan agreement of $15 million equivalent to promote reforms of the country’s finance sector.

The loan will be used to fund the subprogram I of the Financial Sector Program III (FSP III) whose key activities include improving regulatory frameworks and supervision of banks and microfinance institutions to better support a fast-changing domestic market; developing interbank transactions; modernizing payments, clearance and settlement system; updated business registration system; widening consumer access to credit; and strengthening legal frameworks for development of securities market. The program also promotes transparency among finance institutions and measures to combat money laundering and the financing of terrorism.

“The program will help develop a sound, market-based finance sector to be able to enhance resource mobilization and support sustainable and inclusive economic growth,” said Peter Brimble, ADB Senior Country Economist for Cambodia.

FSP III comprises a series of three single-tranche subprograms to be implemented in December 2010 and runs to December 2013. Attached to the loan, the ADB also approved the provision of a technical assistance (TA) grant for the amount of $1.1 million consisting of $800,000  from the Technical Assistance Special Fund and $300,000 from the Cooperation Fund for Regional Trade and Financial Security Initiative to strengthen the capacity of the National Bank of Cambodia, the Ministry of Economy and Finance, the Ministry of Commerce, and the Securities and Exchange Commission of Cambodia under Subprogram 2 of the FSP III.

ADB began assisting the government with financial reforms in 1999. Since 2001, ADB has provided assistance of more than $75 million to the first two phases of the FSP, which generated new and increased loans of $1.52 billion, the creation of more than 12,000 jobs, and the opening of more than 980 new branches of banks and microfinance institutions throughout Cambodia.

The loan of $15 million equivalent from ADB’s concessional Asian Development Fund has a 24-year term, including an 8-year grace period with an interest rate of 1% and 1.5% for the balance term.