4. Cambodia’s Financial Market System: Inclusive Dynamics, Impending Crisis?

See Chap. 3, Fig. 3.​1, and accompanying text.

According to the IMF Glossary of Selected Financial Terms, Article IV consultation is a regular, usually annual, comprehensive discussion between the IMF staff and representatives of individual member countries concerning the member’s economic and financial policies. The basis for these discussions is in Article IV of the IMF Articles of Agreement (as amended, effective 1978) which direct the Fund to exercise firm surveillance over each member’s exchange rate policies” (IMF 2006).

Market saturation in this context is best described as follows: “In an increasing number of markets around the world, microcredit has been so successful that the supply of it is catching up with the demand for it. In other words, markets are approaching saturation” (Rosenberg 2011).

MIMOSA, the Microfinance Index of Market Outreach and Saturation, is a tool to measure capacity and saturation levels in markets.

For an estimation of the number of credit organizations, see Chapter 3, Fig. 3.​3 A Decade of Growth: MFIs and Credit Providers Registered and Reporting; Not Registered and Not Reporting.

As an illustration, China’s online P2P lending platforms have a checkered history. According to research by China International Capital Corporation, experts predicted only 10% of the current P2P lending companies that survived the crisis from 2016 to 2018 less than 200 would still be in business after 3 years (Liu 2018).

A discussion of the effects of the interest rate cap on promoting over-indebtedness is presented in Sect. 4.3 and Sect. 4.4.

The figure is more striking when compared to the adult population. In 2018, Cambodia’s adult population above the age of 20 years was only 58.9% of the population or 9,614,808 of a total population of 16.3 million.

The effects of the interest rate cap on portfolio expansion are explored later in this section.

See Chap.​ 3 for more detail on total borrowers and depositors and trends over time.

There was no evidence of regulated lenders ignoring the required credit bureau consultations to detect multiple borrowing or to report new loan activity.

See Chap. 2 for a discussion of domestic and international remittances and their growth in the past decade.

See the discussion above in this chapter on Proliferation of Small Credit Operators at the Bottom of the Pyramid.

See previous section on increasing average loan size.

See the results of the FinScope (2015, 2016) survey earlier in this chapter that noted in 2015 that 92% of borrowers participating in the survey expressed that it was very difficult (35%) or difficult (57%) to keep up with financial commitments. This is a good indicator for “debt stress.”

The next section focuses on mergers and acquisitions of Cambodian MFIs.

“No pago!” (I won’t pay!)

The microfinance crisis in Bolivia occurred earlier in 1999; however the characteristics of the crisis are similar to others.

Bosnia experienced significant over-indebtedness in the micro and small lending market during the global financial crisis. One healthy response was setting up a debt resolution center involving multiple lenders in 2008–2009. To this day, the Bosnia and Herzegovina’s Debt Advisory Center, an independent association, continues to provide debt counseling and financial education. The Center has become an important feature of the national financial system.

See the previous section on interest rate caps for a more detailed discussion of this topic.

For a review of the financial market’s supporting functions refer to Chap.​ 3.

See Chap. 3, Sect. 3.​3.​5.​3 for more details about complaints and recourse mechanisms and why they are important.

As part of Basel III, the capital conservation buffer is designed to ensure that banks build up capital buffers outside periods of stress, which can be drawn down as losses are incurred. The requirement is based on simple capital conservation rules designed to avoid breaches of minimum capital requirements (Lekatis 2018).

Maruhan Bank Japan was registered only in Cambodia. It is a Cambodian local bank with 100% Japanese ownership that began operating in Cambodia in 2008. There is no Maruhan Bank in Japan. Rather Maruhan Bank Japan, registered in Cambodia, is owned by “MARUHAN Corporation of Japan,” founded in May 1957 by present Sathapana Chairman Dr. Han Chang-Woo, and is today the leading entertainment conglomerate in Japan” (Sathapana 2019). After the merger, the two institutions would be dissolved to create Sathapana Bank. According to Maruhan Bank Japan, at the time it had only one office globally, and that was in Cambodia. The operation was focused on wholesale lending and was the majority shareholder in Sathapana Limited, the MFI.

The next chapter explores how a commercial transformation is not always accompanied by mission drift.

This topic is explored more thoroughly in the Chaps. 5 and 6.

The Smart Campaign is a global initiative with financial leaders to practice financial consumer protection. The Campaign has a rigorous Certification program.

In Khmer, “Hattha Kaksekar” means “Farmer’s Hand” or “A Helping Hand for Farmers.”

Figures as of 2016, before the interest rate cap on micro-lending became effective on April 1, 2017

It is important to note that ACLEDA was the exception to the rule. ACLEDA Bank Plc. consciously preserved its local ownership structure. The next chapter discusses how ACLEDA Bank Plc. has experienced many transitions while emphasizing strategy regarding ownership as market conditions change and an emphasis on retaining majority national ownership.

A value added tax (VAT) is an indirect tax on consumption of goods and services.

Primary financial services that do not earn a profit on the margin are, for example, fee-based financial services, such as money transfers and payments, while financial services that earn a profit on the margin are deposit accounts and loans that earn a profit from interest rates.

Calculation made from a sample of 2016–2017 Annual Reports and Audited Financial Statements of Banks and MFIs. The percentage of tax paid includes all withholding tax, income tax, and other taxes levied by GDT. It does not include shareholder taxes on dividends or other taxes shareholders pay to the Cambodian government or their own governments if they are foreign entities.

See Prologue to Part 2.