Phnom Penh: Small business loans comprise one of the most important loan segments in Cambodia. Small business loans are the business loans given to consumers rather than institutional entities. CBC launched “Small Business Credit Index Report”- a quarterly report on small business credit activity, for understanding and monitoring the small business credit segment in the country. The quarterly version of the report indicates data and trends from Q1 2024.
Key Highlights of the Q1 report
Small Business Credit Performance expanded for both the number of loan account and loan balance which recorded positive growth across the regions. Small Business Credit Applications grew compared to the previous quarter. Loan quality as measured by 30+ DPD slightly decreased than the previous quarter as the share of 30+ DPD balance increased across the regions.
- Small Business Credit Applications
Overall, Small Business Credit applications rose by +3.87%. The increase was due to expand in Working Capital Applications by +4% quarter on quarter, Agriculture Application +9%, Construction Application +2%, and Other Application +1%, where Asset Finance Applications dropped by -12% from the previous quarter.
- Small Business Credit Performance
The total number of loan accounts saw a drop by -1.55% bringing it to around 1.89 million accounts. Outstanding balance grew by +0.9% to reach $34.20 billion by the end of the first quarter in 2024.
- Small Business Credit Quality
30+DPD as a ratio of the total balance increased to +7.76%. The majority of customers’ credit (53%) remained committed to a single financial institution and 37.8% of customers held only a single account.
Small Business Credit Applications
This metric represents intention of consumers to acquire credit in the form of Working Capital, Agriculture, Asset Finance, Construction, and other applications.
In the first quarter of 2024, the number of consumers attempting to acquire credit in five different forms – Working Capital, Agriculture, Asset Finance, Construction, or other applications. The Small Business Credit application rose in overall with the rate of +3.87%. The increase in Working Capital Applications was +4% with the largest increase of +9% in the Coastal region. The growth of Agriculture Application was +9% with the largest increase of +63% in Plateau. There was a drop for Asset Finance Applications of -12%, with the largest decrease of -17% in Coastal region. Construction Applications increased by +2%, with the largest increase of +50% in Plateau region, and Other Applications rose by +1%, with the largest increase of +28% in Plateau region.
The percentage change in the loan amounts sought through the five categories expanded by +4.3%. The expansion was due to Working Capital Application amounts increase of +10.1%, and Construction Application of +4.5%, while there was a decrease of Agriculture Application -7.7%, Asset Finance –14.9%, and Other Application -14.3%.
Small Business Credit Performance
This metric indicates the volume of consumer loan as of the reporting quarter reflecting an active credit market.
As of March 2024, the number of consumer loan accounts for Small Business Credit decreased by -1.55% from the previous quarter, resulting in 1.89 million total number of Small Business loan accounts throughout the country. Out of this number, 54% comprised of Working Capital loan accounts while a much smaller share was recorded for Construction loans (1%) and Agriculture loans (32%), Asset Finance (6%), and Other loans (7%). This decrease was seen in all regions of the Kingdom (-2% in Plateau, Coastal and Tonle Sap regions, and -1% in Plain region.
Consumer loan balance continued to rise, increasing at +0.9% as of March 2024. By the end of the quarter, there was a total of $34.20 billion outstanding consumer loan balance.
Working Capital loan shares 54% of total loan accounts, and in terms of the amount it captured more than half of the total consumer outstanding loan balance with the share of 68%, whereas Agriculture loans accounted for 32% and amounting only for 11%. The share of Finance Asset loans in terms of its outstanding balance at 7%. The share of Construction loans in terms of its outstanding balance remained low at 2%. Overall, there was positive growth in balance in all regions, Plateau +0.1%, Plain +1%, Coastal +0.01%, and Tonle Sap +0.2%.
Small Business Credit Quality
This metric is measured by taking the ratio of loan accounts with late repayments 30 days past their due date, indicated as 30+ DPD. It indicates the creditworthiness and risk of default within the reporting quarter.
The instance of 30+DPD increased to +7.76% in this quarter from +6.59% in the fourth quarter of 2023. Of all the five products, Construction has the highest 30+DPD with the ratio of +19.7%. The largest increase in 30+ DPD was seen in Coastal of +11%, Tonle Sap of 8% and of Plateau and Plain regions of +7%.
The number of customers who held credit accounts with only one financial institution at 53% of all customers. The remaining share of 37.8% represented those having relationship with multiple financial institutions.
The share of the number of customers holding only one loan account stood at 37.8%; those holding two accounts made up +35.8%; those holding three accounts made up +18.6%; and those with more than 3 accounts were only +7.9% of the entire credit customer base.
“The demand for Small Business Credit increased in terms of the number and amount of applications; however, Small Business Credit performance was negative in number of loan accounts -1.55%, while loan balance increased +1.36% in this quarter”, said Mr. Oeur Sothearoath, CEO of CBC. He added that loan quality dropped with an increase in 30+ DPD ratio of +6.59% in the fourth quarter of 2024 to +7.76% in this quarter.