ADB Continues Support for Cambodia's Financial Sector Development
PHNOM PENH, CAMBODIA (1 October 2019) — The Asian Development Bank (ADB) has approved a $40 million policy-based loan for the second phase of a program that is supporting the Government of Cambodia’s efforts to develop an efficient and stable financial sector that promotes greater financial inclusion and sustainable development.
ADB’s assistance for the second subprogram of the Inclusive Financial Sector Development Program, approved in October 2016, is building on the government’s ongoing financial inclusion and development efforts. The subprogram will improve access to finance, particularly for the poor, rural households, the agriculture sector, and small and medium-sized enterprises. Through policy support, it is also enhancing the stability of Cambodia’s financial sector and upgrading financial infrastructure to support the introduction of new financial services and products.
“A stable and modernized financial sector is important for a developing country like Cambodia, so that individuals can have easy access to formal financial services and businesses can borrow reliable capital to expand their operations and contribute to the country’s growth,” said ADB’s Financial Sector Specialist for Southeast Asia Ms. Benita Ainabe. “The program represents the long-term partnership between ADB and the Government of Cambodia in achieving these objectives.”
Cambodia’s financial sector is in its early stages of development and is dominated by the banking and microfinance subsectors. While much has been achieved, access to finance remains limited, especially in rural areas. Financial inclusion is low with only about 59% of the adult population in the country having access to formal financial services in 2015. Moreover, almost one-third of the population is completely excluded, having no access to any form of financial services. Efforts to improve access to finance have been constrained by low levels of financial literacy.
The second subprogram supported the government in finalizing the National Strategy for Financial Inclusion to provide a framework to broaden access to financial services of individuals, particularly women borrowers and micro, small, and medium-sized enterprises (MSMEs). Efforts were also implemented to incorporate financial literacy in the national school curriculum in key subjects in grades 1 to 12. The government-owned Rural Development Bank was also restructured to provide loans to MSMEs in the agriculture sector, while the central government strengthened consumer protection through the establishment of consumer complaint functions in banks.
Subprogram 2 also provided support to the government in establishing a joint financial stability technical group to facilitate coordinated financial sector supervision and crisis management. In addition, it helped the National Bank of Cambodia launch a central shared switch system for automated teller machines and point-of-sales, among others, which allowed consumers to use their bank cards at all participating financial institutions. Finally, the second subprogram supported the submission of key legislation, namely Trust Law, e-Commerce Law, and Consumer Protection Law to the National Assembly for approval.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.6 billion. Established in 1966, it is owned by 68 members—49 from the region.