Small business loans have dominated the share of the loan balance in banks in the country, with the average loan size of Cambodian borrowers increasing by almost 250 percent from $2,800 to $9,600, head of the Association of Banks in Cambodia, Raymond Sia said.

Citing the Credit Bureau of Cambodia, Sia said the outstanding balance has grown steadily year-on-year, increasing from about $3.7 billion in 2013 to $31.8 billion in 2021.

Sia, who was speaking at the 4th CEO Gathering & 2nd SMEs and Financial Institutions Night, said that Small and Medium Enterprises (SMEs) represent 70 percent of employment, which is 99.8 percent of Cambodia’s enterprises, and contribute to 58 percent to the country’s GDP.

He added that he is encouraged to see the support provided by the financial sectors to SMEs in Cambodia and, over the years, he has seen an increase in loans to the SME segment.

He said that even with all of the above, SMEs still face some challenges. One of the most critical issues is access to finance, due to a lack of credible financing records, collateral, good corporate governance, solid business plan and financial literacy.

“Their challenges were compounded by the impact of the Covid-19 pandemic, especially in emerging economies where SMEs are mostly informal. Many of them were unserved or under-served by formal financial institutions,” Sia said.

Sia urged the need to bridge the gap in access to finance and to assist more SMEs and women entrepreneurs by encouraging banks and financial institutions to work closely with SMEs and women entrepreneurs to tailor innovative SME lending products and services to fill their needs.

Am Sam Ath, operations director at LICADHO, said there are pros and cons of lending in the banking sector and that the rights group has released multiple reports about the debt crisis that leads to migration and land loss. On average, a person can borrow from $4,000 to $5,000.

“According to the German report, the average loan per capita was $5,183, which was observed to be high compared to the income of many poor people,” Sam Ath said.

He added that is why some micro-loans violate human rights, such as forced land sales, intimidation, migration, and the elimination of children's education by parents dropping them out of school to find work because of debt.

The main purpose of loans is to improve the lives of people and expand the business, however, some loans that were not implemented in line with international business standards have been intentionally made unethical by credit officers, causing human rights violations, Sam Ath said,

Lending is managed by Financial Institution's principles, but lending in Cambodia seems to be on the rise as some lenders do not follow international and institutional principles, he added.

He noted that bank officials do not implement professional skills and ethics in accordance with the principles. This causes some debtors to fall into various crises.

Civil society organizations are increasingly concerned about lending that human rights abuses are on the rise.

“Approving too many loans weakens the financial appraisal that creates a huge debt. Farmers harvested but had no market to deal with, so set a maximum loan amount and follow the maximum principles of the international business market,” Sam Ath said.