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Interview of VOA with President & CEO of ACLEDA Bank

July 14, 2010

On July 05, 2010, there is an interview of VOA radio with Mr. IN Channy, the President & Chief Executive Officer of ACLEDA Bank on banking services, growth and people's trust on the bank, especially the contribution of banking to Cambodian economic growth.

Ms. ROS Sothea: Good evening, Mr. IN Channy! Could you please briefly describe about the growth of banking system in Cambodia during previous years?

Mr. IN Channy: May I take this opportunity to let all Cambodian people know that on behalf of a leader of ACLEDA Bank, the largest bank in Cambodia, I observe that the growth of banking sector depends on three main factors. First is the stability of politics, economy, and society. Second, structure to control the bank's law and regulation must be sturdy. Third, banking infrastructure has rapidly expanded to outskirts and countryside. As I have noted, only three years has the branch network expanded up to 1,695 branches, equal to 41% increase; commercial bank of 19%, specialized bank of 10%, and microfinance institution of 49% in 2009 while in 2007 there were only 1,202 branches including all banks and microfinance institutions. In regard to banking sector, we focus on the three stabilities mentioned above; strict regulation and branch network nearest to customers, and comparison should be made why the bank can reach the peak. I just wanna notify that 2009 was the world economic crisis year, but deposits increased over 30% in Cambodian banking. Even though credit increased slowly, deposits increased remarkably. As mentioned, the growth of the bank depends on the three main elements; national economy which is satisfactorily boomed, customers using banking services whose living standards are improved, and upgraded bank. The three grows together so that we have a long lasting growth which is called sustainable growth. Credit also takes part. In 2009 there was a slight increase in credit, while there was a great increase in deposit. Comparing to GNP (Gross National Product) in 2005, credit was only 10.4% and deposit was 15.3% of GNP. Yet, looking at the challenging year 2009, credit was up to 27% of GNP, while deposit increased to 32.1%. This shows banking sector is significantly well. ACLEDA Bank has 232 offices in 24 provinces/towns throughout the country and we continue to expand it since the bank's growth is based on the branch network nearest to customers in the community where they are living in and doing their businesses. Although we have over 200 branches and offices, we do not stop such expansion. We will go on preparing infrastructure of the bank widely. We have just launched a new distributor, ACLEDA Unity, banking service via mobile phone.

Caller: I have listened well to your commentary and I find it is very good detail and admire ACLEDA Bank for good deposit and credit services as well as 232 offices in all provinces/towns, but I wanna ask one question. Why is funds transfer from one province to another quite inconvenient, up to 2 or 3 hours to receive the transferred? But sometimes it's ok, only 1 hour!

Mr. IN Channy: Thanks for such good question! Our network has been expanded nearest to you for your approach. Among our entire 232 branch network, only 66 offices are online while others are offline using phone and fax to transfer data instead. If transfer in online branches, we can deal it very prompt. Whereas in offline branches we need to fax to clarify the figure and identity of the one who transferred to check both parties and being slow is because of fax system. I would also like to thank for this comment. Now ACLEDA Bank has another substitute system, ACLEDA Unity, allowing you to operate funds transfer via your mobile phone which is very convenient; no need to wait up to 2 hours, but only 2 minutes at most!

Ms. ROS Sothea: Is ACLEDA Bank an initiator of the electronic banking?

Mr. IN Channy: Actually, there are others as well; but ACLEDA Unity, a new banking service, allows customers to transfer their money; and its special feature is to link from one account to another for a customer using ACLEDA Bank's service which is able to check easily and fast.

Ms. ROS Sothea: Up to now, are there many people start to use banking service? Previously they like to use unofficial system. For instance, they go to transfer their money at market or borrow from friends or from lenders for interest and so on, but generally how better is it to use banking service?

Mr. IN Channy: As I told earlier, regarding amount of money as well as numbers of customers, it is approximately 30%, equal to 1/3; but in terms of numbers of family in annual report 2009 of National Bank of Cambodia, there are over one million families comparing to a family of five members in average; and among 14 million people, there are over 2 million families. So, this is a great increase. When our economy is developing, people start to trust banking strongly. And why should they trust? First, depend on the three stabilities, economy, politics, and society that the government has prepared to ensure sustainable economic growth which is significant point. Second is national law to protect banks well i.e., corporate governance to rule banks, regulation on sufficient reserve in response to banks' risks, and law to increase banks' capital. These laws and regulations bring trust and the addition of banks and microfinance institutions nearest to customers responding to their needs promptly also builds faith, including mobile phone banking for funds transfer, bill payment, etc.

Ms. ROS Sothea: During the midyear 2010 how is the growth of credit and deposit? If there is a great increase in deposit, is it a concern in banking system?

Mr. IN Channy: 2009 is our tough year, but the deposit's growth is still good. 2010 is the revival of the three parts, national economy, all banking, and customer's needs. During first semester of 2010, there was at least 15% increase in deposit, and almost 10% in credit comparing to 2009 of only nearly 5% in credit of the whole banking system. Therefore, this year all three elements must grow together to have a real growth. Because of the nationwide branch network, the growth of ACLEDA Bank is greater than the growth of entire banking system. We have an increase of 16% in deposit and 14% in credit during first semester of 2010.

Ms. ROS Sothea: What is the cause of this growth, because of the economic revival, or depending on Cambodian economy or international economy as a whole?

Mr. IN Channy: Cambodian economy depends on three main bases, garment, agriculture, and tourism sector. Those three sectors have driven the growth of other sectors. For just the garment sector, there are thousands of workers. If there is an increase of 20%, people working in that enterprise also gain benefits and so do their families. Tourism is also a crucial income for our country. When there is an increase in tourists traveling by land and improvement in agriculture, I see better infrastructure and ongoing improved irrigation system by the government and this really warms to banks that formerly it was thought highly risky to credit with agriculture, but now there is enough irrigation for agriculture, so other sectors will grow together accordingly.

Caller: The interest rate for credit provided by ACLEDA Bank is high. Can you reduce it to only 1% per year?

Mr. IN Channy: Actually, a bank is a cash manager taking from more prosperous customers to less prosperous customers. We are a middleman who helps to deal for both parties' needs. Prosperous people deposit with the hope of getting a good interest rate while borrowers want to get loan with low interest rate. In Cambodia the interest rate for fixed deposit is at least 5% per year and some banks provide up to 6% for US Dollar currency, whereas 8% or 9% for Khmer Real currency. If so, can the bank provide loan to customers in a rate of 1% per year? No, quite impossible! As I told you already, if there is a high demand in loan, banks or microfinance institutions have to set the better interest rate for both parties so that all the three parties can survive together; depositors can get a good interest, borrowers also pay a proper interest, and the bank also can gain some for its sustainability and nearby you always.

Ms. ROS Sothea: Banking sector is regarded as a good model for economic support by providing loan and getting deposit for credit to support people's living. While growing remarkably as you have mentioned, what will banking sector in Cambodia encounter? According to documents and reports of ADB and IMF, banking in Cambodia is still regarded weak! How do you think?

Mr. IN Channy: We need to see deposits in the bank and credit first so that we can weight how it is. Regarding figure, in the first semester of 2010 deposit is over US$3,000 million, while credit is only over US$2,000 million. This is the gap between cash on hand and credit. If there is much cash on hand which is called much 'liquidity', that is the burden of the bank to pay for the interest of depositors. Perhaps this is what ADB as well as other international institutions judges us weak. We have cash on hand, but cannot manage to use it up. Besides, we need to see the comparison between deposit and GNP. As I told already at the end of 2009, there is only over 30% of deposits and banking is doing well only when deposits and GNP is at least equal so that we can call it is the optimized use for credit.

Ms. ROS Sothea: Is there any need to reform banking system in Cambodia today?

Mr. IN Channy: Regarding banking system, let have a look at laws and regulations to rule banks. If you saw a report of Economic Intelligent Unit, based in England, there is a rating on microfinance institution's management in Cambodia which is rated number 1 that our laws help to improve finance sector, particularly microfinance institutions focusing on low segment. This is a good point to know what extent we shall change since bank's regulation is global. If there is any reformation, it complies with the national and international law. I much appreciate banking law today because we are in the Least Developed Country list so that we cannot take the five-star-banking law to enforce yet. We need to update our law in accordance with the growth of economy, comprising of microfinance institution's management law in the world top class compared to country's economy with 50 and law to control commercial banks that have changed much and I think that is enough for banking development. As I told earlier, only 3 years is there an improvement of 40% and branch network everywhere. What we need to do next is to make it more convenient, safer, and simpler for customers. The most important of all is to train and broadcast more. Our law now is good enough to control bank and finance institutions.

Ms. ROS Sothea: That means the understanding of people is still limited?

Mr. IN Channy: Yes, for example, the question 'Can the interest rate for loan be only 1% per year?' This question shows that he is shortage of much information we need to provide. We, the bank and intelligent customers, should help one another to share information for more understanding and grow together.