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Lenders anticipate the challenge of raising the local currency ratio.

Lenders anticipate the challenge of raising the local currency ratio.

commercial lenders have said the central bank’s requirement that banks and microfinance institutions (MFIs) increase the share of local currency in their loan portfolio to at least 10 percent by the end of 2019 could prove challenging to implement as their biggest clients exhibit a strong preference for deposits and loans in foreign currencies.

The National Bank of Cambodia (NBC) on Monday affirmed it was committed to implementing a prakas issued last December that instructed all banks and MFIs to hold a minimum 10 percent of their loan portfolio in Cambodian Riel. The prakas gives commercial lenders until the end of 2019 to comply with its 10 percent threshold, which aims at promoting the use of the national currency.

This deadline should not be pushed back because if we do it now we’ll see people pushing for another postponement [as the deadline approaches],” NBC Director-General Chea Serey said during a meeting with local banking industry representatives.

NBC officials have also asked banks and MFIs to submit periodic progress reports. “Recently, we required all financial institutions to submit their action plan to tell us what are they up to and outline their future plan for fulfilling the Cambodian riel requirement of their loan portfolio,” she said.

Serey insisted that local lending institutions still have ample time to meet their obligations, adding that the threshold requirement could encourage more cooperation between banks and MFIs.

“We acknowledge that some banks are having difficulty, but that does not mean they cannot do it because there is a big demand for riel for microfinance lending to people in rural areas, so [banks] can find ways to cooperate with those MFIs.”                   Source: Phnom Penh Post


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