With approximate 14 millions populations, Cambodia is still considered as one of the poorest countries in the world by being ranked in the Human Development Index (HDI) 2007/2008 the 131st out of 177 countries in the world. People life expectancy is 58 and adult illiterate rate is still very high 26.4%.

Children underweight for age 0- 5 years are 45%.
Estimated GDP per capita in 2007 of was about US$548, and this led by garment exports, tourism and construction have shown growth rate of 9.6% in 2007. Domestic investment driven largely by the private sector, account for 23.4% of total GDP. Approximately 2,860 new businesses registered for operation in 2007, a 71 % increase over 2006.

Foreign Direct Investment (FDI) reached $600 million which was slightly more than Cambodia received in official development assistance (ODA). This is about 7% of the total GDP. Internally, the banking sector has expanded rapidly leading to the sudden proliferation of credit, and increased cost of construction materials and some wages. The higher oil and commodity prices have driven inflation and the depreciated dollar may hurt sectors that are vulnerable to price competition. Economic risks have increased including the slowing down of garment exports (impact of US sub-prime mortgage crisis and increased competition from Vietnam) but the mix of growth in services (tourism and housing construction) means that the economic outlook for 2008 is generally considered good. 80% of the population is in rural area; and primarily depending on agriculture sector while most of agriculture inputs such as fertilizer, machinery, insect pesticides, and gasoline are imported from Vietnam and Thailand. Moreover, after being collected from the field, most of these agricultural crops are exported to Thailand and Vietnam and bought back during the shortage. In most areas in Cambodia, farmers can grow their crops only once per year because of shortage of water resource. The country is still poor in irrigation system.

Microfinance Environment

Entry of various international non-government organizations (NGOs) in Cambodia in the 1990s led to the recognition of microfinance as a tool for combating poverty. Microfinance started in Cambodia commonly as NGO projects and without any legal provisions with usually higher charged interest rates.

In January 2000, the National Bank of Cambodia (NBC) issued a law on licensing microfinance institutions. This law stipulates that all NGOs, associations and MFIs engaged in credit services with more than 1,000 clients or 100 million Riel of loan outstanding should be registered to the NBC.

As of Sept 08, there are about 17 Licensed Microfinance Institutions serving approximately 767,164 clients with loan outstanding amounting of about USD262,894,203. Besides these licensed MFIs, there are about 25 registered MFIs and some 60 NGO projects providing loans to some parts of Cambodia.

In 2002 several leading MFIs agreed on the importance of establishing an entity to lobby the needs of microfinance institutions. Hence, in 2004 the Cambodia Microfinance Association (CMA) was formalized and registered with the Ministry of the Interior as an NGO.  In recent years the Cambodia Microfinance Association (CMA) has played a major role in the institutional development of Cambodia’s MFIs.  However, since Cambodian law only allows for one professional association related to banking services, the CMA became a subsidiary of the Association of Banks of Cambodia (ABC) in 2007.

Mandated and supervised by the National Bank of Cambodia, existing MFIs have shown improvement from year to year and competed well with each other enabling its services more efficient and better designed to help the poor. Microfinance regulations are updated by NBC accordingly to better protect the public and the borrowers. Previously updated regulation is the savings regulation that enables MFIs to register to become a Deposit Taking Institution. Those MFIs who would be able to complete requirements for registration can now mobilize public savings.

The new savings regulation slowed down the mobilization of public savings as most MFIs are only allowed to maintain current accounts. In mid 2007, the 17 registered MFIs generated only a total of US$5 million in 25,000 accounts (much of which is required counterpart for loans), compared to ACLEDA Bank’s US$466 million in 344,657 deposit accounts. Transformation of MFIs into deposit taking institutions is a great challenge for all stakeholders in the microfinance sector in order to continue to actively mobilize public savings especially in the rural areas.