Consumer Debt Increases 7.5 Percent in Three Months

2 min read
The National Bank of Cambodia in Phnom Penh.
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Personal loans taken out by Cambodians reached a total of $6.7 billion in the first three months of the year, a 7.5 percent increase on the previous quarter, credit reporting firm Credit Bureau Cambodia (CBC) said.

In its quarterly Consumer Credit Index report, CBC said 1.5 million people had taken out loans from banks and microfinance institutions in the form of mortgages, credit cards or personal finance.

Just over half — at 51 percent — of the debt was in personal finance, including personal business expenditures, agriculture and personal consumption.

Personal consumption, to buy items such as consumer goods, furniture and vehicles, amounted to about 15 percent of the total, CBC said.

A further 48 percent of the loans were real estate mortgages, and the remaining 1.1 percent spent on credit cards.

CBC chief executive Oeur Sothearoath advised caution over the growing proportion of debt for personal consumption.

“The [total] amount of the loans at this level does not cause worry,” Sothearoath said. “But since these loans are considered to be debt that does not create income, we need to pay attention and be careful as these personal loans continue to increase.”

Applications for personal finance increased 37 percent in the quarter, compared to just 7 percent for mortgages, the report said.

Economic analyst Yourng Pakk said amount of debt being spent on personal items overall — as opposed to business investments — needed to stay below 20 percent to avoid dragging on the economy.

“I think banks already take careful consideration before lending to someone to buy a phone,” for example, Pakk said.

However, “if this segment increases to more than 20 percent of all loans, it means we are losing 20 percent of potential income already,” Pakk said.

The government should put a limit on personal loans at 20 percent, and banks should be more careful about the risks, he said.

According to the National Bank of Cambodia, total debt, including lending to businesses, amounted to about $30 billion at the end of 2018.

(Translated and edited from the original article on VOD Khmer)

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