By
Simon Lewis - December 27, 2012
Despite an expanding financial sector, increasing access to credit
and strong economic growth in recent years, fewer than 1 in 20
Cambodians has a bank account, according to a new policy working paper
by the World Bank.
According to the paper—released earlier this month and based on
questions added in 2011 to the Gallup World Poll, which surveyed at
least 1,000 people in each of 148 countries—the low number of people
covered by the banking sector is a barrier to Cambodia’s economic
progress.
“Without financial inclusion, individuals and firms need to rely on
their own resources to meet their financial needs, such as saving for
retirement, investing in their education, taking advantage of business
opportunities, and confronting systemic or idiosyncratic shocks,” the
World Bank paper says, adding that those with bank accounts are more
likely to save money and be prepared for harder times.
Highlighting how underdeveloped the banking sector still is in
Cambodia, the paper says that just 19 percent of Cambodian adults
surveyed had received a loan from a financial institution in the past
year. But far more, 39 percent, had taken a loan from family or friends.
Only 4 percent of people nationwide have a bank account in which they
can deposit money—a figure that is halved when only the poorest 40
percent are looked at. And even among the richest 20 percent of
Cambodians, only 12 percent have a bank account, the report says.
Those figures put Cambodia well below its peers in the number of
people with a bank account—a key measure of financial inclusion
according to the report. Cambodia is among only a few
countries—including the Central African Republic, Kyrgyzstan and
Yemen—where more than 95 percent of adults are without bank accounts.
The report says rates of financial inclusion depend largely on
banking costs, how close people live to a bank and the kind of
documentation required to open a bank account.
“Policies targeted to promote inclusion—such as government
requirements to offer basic or low-fee accounts, exempting small or
rural depositors from onerous documentation requirements, and the use of
bank accounts for government payments—are especially effective among
rural residents and the poor,” the paper says.
The low banking rate cannot just be explained by Cambodia’s large
rural population, said Chan Sophal, president of the Cambodian Economic
Association.
“Even in Phnom Penh, many people do not bank and it’s fewer in the
provincial towns,” he said. “Because of the upheaval in history, people
did not use banks for many years. It’s been changing but it is slow to
catch up.”
Still, Mr. Sophal said the low bank coverage in the country did not mean people in the country were not spending or investing.
When the Khmer Rouge came to power in 1975, the regime abolished
money and banks in Cambodia, blowing up the National Bank of Cambodia.
Many in the country still remember when the riel was reintroduced in
1980.
“That means they don’t feel secure enough about the social-political
situation…. Maybe instead of putting the money in the bank, they use the
money to buy property or land,” said independent political analyst Chea
Vannath, noting that many believe they can make more money from
speculating on land rather than putting it in bank accounts.
“There is a cultural barrier—Cambodian people have not used bank
accounts in their lives,” said Bun Mony, chair of the Cambodian
Microfinance Association and chief executive at Sethapana Limited
microfinance bank.
He said the seven leading microfinance institutions had expanded into
all provinces and were now offering deposit accounts, which would make
more people aware of the benefits of banking.
“The number of customers using the microfinance banking service
accounts is increasing every day, so people will begin to understand why
it is helpful,” Mr. Mony said.
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