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The National Bank has created a system to register asset management institutions, often called “bad banks”, that can buy distressed assets and non-performing loans from banks and microfinance lenders, according to a proclamation issued this month.
The move comes as the country’s non-performing loan (NPL) ratio climbed to nearly 9% last year, a 10-year high, central bank data show.
Cambodia has the world’s highest microcredit debt per capita. Millions of low-income workers rely on small loans for business and emergency expenses, though rights groups say some lenders engage in predatory practices.
The value of outstanding microloans has more than doubled in seven years. In 2024, some 3.8 million households held more than 3.1 million microloans worth over $18 billion.
Under the new regulations, asset management institutions (AMIs) must obtain prior approval from the National Bank (NBC) before acquiring and managing NPLs and distressed assets. They are required to have a minimum registered capital of 200 billion riels (about $50 million). Licences will be valid for five years and may be renewed.
The NBC said the framework is intended to provide lenders with a structured mechanism to transfer and resolve troubled assets, strengthen balance sheets and maintain confidence in the financial system. The registration process formalizes the role of AMIs, which had previously operated in a legal grey area.
Development banks have cited AMIs as a policy tool to address elevated NPL levels, including during the Asian financial crisis in the late 1990s.
Ky Sereyvath, an economist and director at the Institute of China Studies at the Royal Academy of Cambodia, said the framework could help prevent bank failures that might have wider repercussions across the sector.
“This prevention contributes to risk management and strengthens caution in managing bank assets, allowing the National Bank to fully oversee the operations and assets of commercial banks and prevent concealment of losses or bankruptcies,” he said.
Some banks have had their licences revoked over the past year after facing international sanctions over alleged ties to online scam networks, triggering runs on deposits in some cases.
Panda Bank, which has been linked to other financial institutions accused of laundering proceeds from online scams, had its licence withdrawn this week due to what the NBC described as a deteriorating financial condition.
But some banking experts said creating a formalized asset management sector may do little to address underlying structural problems.
Stephen Higgins, managing partner of Phnom Penh-based Mekong Strategic Capital, said investor appetite for such institutions may be limited given the length of time required to resolve bad loans through Cambodia’s legal system.
“An asset management company is still going to face that problem, and they won’t want to be stuck with, and having to fund, problem loans for another five to seven years,” he said.
