Foreign Currency Deposits See Strong Growth

Foreign currency deposits grew briskly during the first four months of the year, a sign that public confidence in Cambodia’s financial institutions is high despite the uncertainty after last year’s disputed national election, bankers said this week.

Cheam Teang, executive vice president of Acleda Bank Plc., said the bank’s foreign currency deposits increased more than 85 percent year-on-year—from $120 million in the first four months of 2013 to $225 million during the same period this year. The main currencies being deposited are U.S. dollars and Thai baht.

The surge in deposits shows that customers have regained their confidence in Cambodia’s banking system after mass withdrawals during the national election, Mr. Teang said.

“The confidence in Acleda Bank has come back, because around the election our customers were able to withdraw as much cash as they wanted during a time of crisis,” he said.

“That’s why now they are more confident in us.”

Mr. Teang added that deposits in Cambodian riel have also grown, but at a more moderate pace, from $24 million in the first four months of 2013 to $30 million in 2014.

At Malaysian-owned CIMB Cambodia Bank, foreign currency deposits grew from $153 million in the first four months of 2013 to $221 million in the first four months of this year, according to Heng Vuthy, the bank’s head of strategy and finance.

“About 99 percent of all our customer deposits are in U.S. dollars,” Mr. Vuthy said. He also attributed the strong growth in deposits to increased confidence in the banking system.

In the microfinance industry, a similar boom in foreign currency deposits has occurred amid overall deposit growth of 54 percent to $536 million during the first quarter of this year. Loan disbursements in the same period rose by 14 percent to $200 million.

Bun Than, CFO of Sathapana Limited, a member of the Cambodia Microfinance Association and one of the seven microfinance institutions that accept deposits, said foreign currency deposits are flowing in at a faster pace.

The MFI saw a 27.5 percent increase in the first four months from $80 million in 2013 to $102 million in 2014.

“Our institution is seeing faster growth compared with previous years because the people now have more confidence in MFI services and are better off,” Mr. Than said.

Jayant Menon, lead economist at the Asia Development Bank’s regional economic integration office, said an increase in foreign currency deposits can be beneficial for the economy if properly monitored.

“An increase in the money supply can spur demand and spending, which can boost growth, but can also lead to inflationary pressures if left unchecked,” he said.

(Additional reporting by George Styllis)

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