Cambodia Microfinance: Development and Challenges

This paper traces the development of the microfinance sector in Cambodia.

The Cambodia banking system started in the early 1990s when the country transformed from being centrally planned to a free market economy. MFIs have thrived in Cambodia since the early 1990s, and most of the country’s 24 provinces now have microfinance services provided by MFIs and NGOs. The government adopted the following policy measures to improve rural financial services:

• Establishment of the Credit Committee for Rural Development in 1995;
• Introduction of a framework in the Banking Law to enable eligible NGOs and other rural finance providers to become regulated MFIs;
• Creation of a unit in the National Bank of Cambodia to supervise and monitor MFIs;
• Establishment of the Rural Development Bank to provide financing for MFIs.

Microfinance activities in Cambodia have contributed towards development and poverty reduction. It has helped borrowers achieve better living standards through access to credit services. Finally, MFIs need to be encouraged to extend their branches to remote areas and mobilize savings.