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Kingdom of Cambodia Financial Sector Development Strategy 2006-2015
In a bid to strengthen its financial sector and promote economic growth, the Kingdom of Cambodia has introduced a comprehensive development strategy for the period 2006-2015.
Objectives
The strategy aims to enhance the role of the financial sector in private sector development, improve confidence and financial intermediation, maintain stability in the financial sector, and promote good governance and efficiency.
Progress in Banking
In recent years, the banking industry has witnessed significant growth, with both credits and deposits increasing rapidly. The interest rate spread remains high, making banks more profitable. However, despite a decline in the prudential ratio, overall enforcement has improved.
Financial Sector Reforms
The government has implemented several financial sector reforms to promote private sector development. These reforms include:
- Strengthening banking systems through bank restructuring and supervision capacity building
- Modernizing NBC operations
- Establishing a reliable payment system
- Clearing house for USD and Riel checks
- Developing fundamental legal bases for money markets and capital markets
Challenges and Risks
Despite progress made, several challenges and risks remain. These include:
- A highly dollarized economy
- Poor collateral registration and valuation
- High credit risk
- Huge expansion of risk-weighted assets
- High operating costs
- Low access to formal finance
- Weak institutional framework for private sector activity
- Slow money market development
- Lack of reliable information in lending environments
- Limited legal frameworks to enforce commercial contracts
Financial Sector Development Strategy 2006-2015
The strategy outlines several key challenges for the National Bank of Cambodia (NBC), including:
- Improving confidence and financial intermediation
- Maintaining stability in the financial sector
- Promoting good governance, and enhancing efficiency
To achieve these goals, the NBC plans to:
- Automate payment, clearance, and settlement systems
- Enhance consumer access to credit
- Encourage product and service innovation
- Improve disclosure and transparency in financial reports
- Strengthen credit information sharing systems
The strategy also aims to maintain stability by:
- Strengthening financial institutions and prudential capacity
- Reviewing laws and regulations
- Enhancing good governance through the fit-and-proper test for bank managers
Conclusion
Financial sector development is crucial to economic growth and poverty reduction. The Kingdom of Cambodia’s Financial Sector Development Strategy 2006-2015 aims to promote a strong and well-functioning financial sector that can mobilize idle financial resources for productive investment needs.