Logo of Phnom Penh Post newspaper Phnom Penh Post - Local lenders say reluctant to lift interest rates

Local lenders say reluctant to lift interest rates

Content image - Phnom Penh Post
NBC deputy governor Chea Serey at an event in Kampong Speu province promoting the local currency, on April 3. CHEA SEREY VIA FB

Local lenders say reluctant to lift interest rates

Cambodia Microfinance Association (CMA) members have not raised interest rates of existing loans, even amid reports of local financial institutions doing so in light of rate hikes among major sources of funding, particularly in the US and Europe, according to the head of the association.

CMA chairman Sok Voeun told The Post on April 6 that overseas interest rates – especially in the US and Europe – have been marked up considerably to tackle inflationary pressures. And with much of the Cambodian financial sector’s funding coming from abroad, this has also had a significant impact on the Kingdom, he pointed out.

“Despite the rising interest rates on the international market, which are also affecting us, the members of our association have not raised interest rates for existing customers,” he assured.

“This means that an existing customer will continue to pay the same interest rate of their loan until the end. However, new or renewed loans will have their interest rates adjusted according to market conditions,” he explained.

This approach will promote social order and better ensure the financial stability of clients in the context of Covid-19, he said, adding that the CMA and members will push ahead to keep operations running sustainably as well as work closely with customers to improve relations, despite the pressures facing microfinance institutions (MFI).

Cambodia Post Bank (CPBank) CEO Toch Chaochek affirmed to The Post on April 6 that his bank has not increased interest rates on existing loans, despite acknowledging that the agreements contain a clause authorising the lender to adjust rates based on operating costs.

He pointed out that customers can file a complaint in the event that a financial institution jacks up the interest rate of a loan wherein the agreement does not include such a clause.

Hong Vanak, director of International Economics at the Royal Academy of Cambodia, told The Post that such alleged rate hikes are not an adequate response to the current economic situation, stressing that these moves would place an additional burden on borrowers, many of whom are experiencing reduced incomes.

Vanak was far less critical of higher interest rates on new loans, however, chalking them up to market forces and global trends.

At an April 5 event in Preah Sihanouk province promoting the local currency, National Bank of Cambodia (NBC) deputy governor Chea Serey recapped that the Federal Reserve (Fed) – the US central bank – has increased the benchmark interest rate several times since March 2022 in a bid to reduce inflation, which not too long ago hit a four-decade high.

Serey said these rate hikes have pushed interest rates up globally, with Cambodia beginning to feel the effect of Fed tightening early in 2023 as well, with “several” financial institutions raising rates on dollar-denominated debt – which she blamed on the Kingdom’s high degree of dollarisation as well as the high proportion of dollar-denominated loans.

“This is also interesting – since we tend to pay in US dollars, whenever the Fed wants to devalue or appreciate its currency, we’re unable to complain. And reasons why the US has been increasing interest rates to such high levels include: high inflation and not wanting people to take out loans,” she explained.

Serey issued a general call to step up use of the local currency – KHR, or the riel – to improve the NBC’s ability to control interest rates in the Kingdom.

For reference, in its 2022 annual report, the NBC indicated that Cambodia’s formal “banking” system comprised 59 commercial banks; nine specialised banks; five deposit-taking MFIs (microfinance institutions); 82 non-deposit-taking MFIs; 224 rural credit institutions; 16 financial leasing companies; five third-party processors; 34 payment service providers; one credit information sharing service provider; six foreign bank representative offices; and 2,869 money exchange businesses.

The Kingdom’s five deposit-taking MFIs – or MDIs – were: Amret Plc, AMK Microfinance Institution Plc, PRASAC Microfinance Institution Plc, LOLC (Cambodia) Plc, and Mohanokor Microfinance Institution Plc.


  • Tensions high ahead of historic Kun Khmer match up

    The long-awaited November 5 matchup between Kun Khmer legend Prum Samnang and Myanmar-Canadian boxer Dave Leduc has become the most anticipated fight of the year. The Wurkz Sena Kun Khmer promotion, which will be held at the Town Arena at Chip Mong 271 Megamall, will see six

  • Manet: Cambodia safe for travel

    Prime Minister Hun Manet acknowledged that Cambodia and China have cooperated to tackle internet scamming, fraud and other cross border crimes, but insisted that the “Kingdom of Wonders” is completely peaceful and safe. He welcomed tourists to come and explore its rich heritage. During a

  • UNESCO formally list Battambang gastronomy

    Battambang, renowned for its cultural heritage, has achieved a significant milestone as the first Cambodian municipality to join the UNESCO Creative Cities Network (UCCN). The UCCN unites nearly 300 cities prioritising creativity and cultural industries in local development plans and international cooperation. On World Cities Day,

  • Cambodia pivots to solar, wind energy

    Cambodia is planning a move towards solar and wind energy to meet its rising power demands, according to Minister of Mines and Energy Keo Rottanak. On the sidelines of the Singapore International Energy Week event held recently, Rottanak emphasised the urgency of diversifying Cambodia’s

  • Angkor causeway symbol of Cambodia-Japan ties

    In a historic moment marking another milestone in the 70-year-long diplomatic relations between Cambodia and Japan, King Norodom Sihamoni celebrated the formal inauguration of a causeway located to the west of the world-renowned Angkor Wat. While presiding over the November 4 ceremony, the King emphasised the

  • Manet calls for Cambodia’s railways to get back on track

    Prime Minister Hun Manet has instructed the relevant authorities to expedite studies into upgrades to the Phnom Penh to Preah Sihanouk railway line. He suggested that the maximum speed on the line should be increased to 80km/h, in order to expedite the transportation of