PHNOM PENH: The Cambodian microfinance sector has emerged as a transformative force in the national economy, championing an impressive surge in the adoption and use of the Khmer Riel (KHR) in 2023.

The sector reported that 25 percent of its loans and 16 percent of deposits are now denominated in Riel, the Cambodia Microfinance Association (CMA) said in a press release issued on Mar. 25.

The total loan balance in Cambodian Riel escalated to an unprecedented KHR 5.56 trillion. Furthermore, the volume of Riel deposits at Microfinance Deposit-taking Institutions (MDIs) has swelled to KHR 1.52 trillion, signaling a notable shift in the public's saving habits toward the local currency.

These figures are indicative of a growing confidence in the national currency, greatly surpassing the benchmarks previously set by regulatory bodies, CMA said.

Under the stewardship of the National Bank of Cambodia (NBC) and collaboration with the CMA and other stakeholders, extensive efforts have been made to broaden the public's understanding and embrace of the Riel. Initiatives focusing on improving financial literacy, advocating for adopting digital transactions in Riel, and highlighting the advantages of a vigorous local currency system have been critical. These endeavours have paved the path toward establishing a more inclusive and durable financial environment nationwide.

Ms. Dith Nita, Chairperson of the CMA, highlighted the strategic importance of these initiatives. “The comprehensive approach that our members adopted in 2023 was designed to elevate the Riel's role in our financial transactions and to deepen our community's relationship with our national currency. This effort is crucial for creating an inclusive and resilient financial ecosystem,” she said.

The influence of microfinance loans on the Cambodian economy has been significant, touching upon various sectors such as households, commerce, agriculture, and beyond, she added.

“Our targeted interventions across these sectors have not only propelled economic activity but also emphasised the microfinance sector's integral role in supporting Cambodia's developmental ambitions,” Ms. Dith Nita commented.

According to CMA, the remarkable growth in transactions through Cambodia's Bakong payment system, with a 3.4-fold increase in Riel transactions, significantly outstripping those in U.S. dollars, underscores a year of unparalleled success for the national currency.

“This leap forward symbolises a concerted push towards cementing the Khmer Riel's position as a preferred medium of exchange, bridging the gap between digital and traditional commerce. It's a clear indication of Cambodia's journey towards economic self-sufficiency and sustainability,” CMA said.

Cambodia has 59 commercial banks, nine specialised banks, and 87 microfinance institutions across the country, with 16.5 million deposit accounts and 3.8 million credit accounts, pointed out the NBC report.