Cambodia Investment Review
Business loan arrears improved in the fourth quarter of 2024, with the proportion of loans overdue by more than 30 days dropping to 8.3% from 9.0% in the previous quarter. While this signals a slight improvement in loan performance, the overall credit landscape remains mixed, with a decline in the number of loan accounts and new credit applications, despite an increase in the total outstanding balance.
The report by Credit Bureau Cambodia revealed that the total number of small business loan accounts fell by 1.1%, bringing the total to 1.83 million. However, the total outstanding balance grew by 1.3%, reaching $35.14 billion. This suggests that while fewer businesses took on new loans, those who did sought larger amounts.
Credit Bureau Cambodia Small Business Report Q4 2024.
Credit Applications Decline Despite Higher Loan Amounts
The fourth quarter saw a notable drop of 13.2% in small business credit applications, indicating a more cautious borrowing environment. Applications for working capital loans, which make up the largest share of small business lending, fell by 9.2%. Agriculture loans recorded the steepest decline at 24.8%, while asset finance applications dropped by 22.0%. Construction loan applications saw only a marginal decline of 0.2%, though this category accounted for the highest delinquency rate among all loan types.
Despite the decline in applications, the total loan amount applied for increased by 8.9%. This was driven by a sharp rise in construction loan requests, which surged by 40.2%, followed by working capital loan requests, which grew by 9.9%. Other loan categories, including asset finance and general business loans, saw smaller increases. The only category to see a reduction in the total amount requested was agriculture, which dropped by 3.7%.
Credit Bureau Cambodia Small Business Report Q4 2024.
Loan Performance and Borrowing Trends
While the decline in the 30+ days past due (30+ DPD) ratio to 8.3% signals an improvement in repayment performance, certain loan categories remain a concern. Construction loans recorded the highest delinquency rate at 12.7%. Regionally, the largest increases in arrears were observed in the Tonle Sap (9.7%), Coastal (9.4%), Plateau (8.8%), and Plain (7.8%) regions.
The report also provided insights into borrowing behavior among small businesses. A majority (65%) of borrowers maintained credit with only one financial institution, and nearly half (49.4%) held a single loan account. Borrowers with two loan accounts comprised 32.7% of the total, while those with three loan accounts made up 13.1%. Only 4.8% of small business borrowers held more than three loan accounts, indicating a relatively cautious approach to debt accumulation.
Oeur Sothearoath, CEO of the Credit Bureau Cambodia (CBC), commented on the findings, stating that while the number of applications declined, the overall amount of loan requests increased. He noted that loan quality showed signs of improvement as the 30+ DPD ratio declined from the previous quarter, reflecting some stability in repayment trends.
As small businesses continue to navigate economic uncertainty, lenders will be closely monitoring credit performance to balance portfolio growth with risk management. The increase in total outstanding loan balances suggests that demand for capital remains, but the decline in new applications indicates a more selective borrowing approach among businesses.
