The Nation Thailand frames the story as Cambodia facing rising debt risks and financial pressure, but the introduction of distressed-asset buyers may also signal a step toward institutional development in Cambodia’s financial market. The article mainly talks about how the increasing bad loans in Cambodia could provide a signal of financial instability. These concerns are understandable; however, rising NPLs alone cannot be used to judge financial distress, as doing so may overlook a broader context. Another way to understand this policy is to examine Cambodia's financial and banking health over the last decade.
Over the past decade, Cambodia’s banking and microfinance sectors have grown quickly as credit became easier to access for households and businesses. Additionally, Cambodia pushed financial inclusion through the National Financial Inclusion Strategy 2016–2025, which encouraged people to use formal financial services. This expansion helped many people buy homes, start their own SMEs, and support daily consumption. The fast-growing loans that matched the blooming economy in the post-COVID-19 period may contribute to today's situation. The COVID-19 pandemic disrupted economic activity, while the slowdown in parts of the property market and global economic uncertainty also affected many borrowers’ incomes. Moreover, the slowdown in the real estate sector may also be one of the factors. Therefore, risks such as rising household debt, pressure in parts of the property market, and repayment challenges in some microfinance portfolios remain issues that regulators must continue to monitor.
In this context, rising NPLs are not unusual. Many countries experience similar adjustments after periods of rapid credit growth. Seen from this perspective, Cambodia’s policy is not only about managing risk. It is also about giving the financial system more tools to deal with credit cycles. Allowing companies to buy distressed loans can help create a real market for bad debt. In many developing countries, banks often keep troubled loans on their books because there are few buyers willing to take the risk. As a result, these loans can remain unresolved for years. The problem becomes even more complicated when banks grant debt relief or repeatedly restructure loans during difficult periods such as the COVID-19 pandemic, floods, or other economic shocks. In some cases, banks are also reluctant to take borrowers to court to seize collateral because they want to avoid reputational and social risks. This hesitation can delay the resolution of non-performing loans.
However, once specialized investors are allowed to step in and purchase these loans, the situation begins to change. The market can start to decide what those bad loans are actually worth.
In practice, this can make it easier for banks to deal with bad loans and move forward. Rather than carrying troubled assets indefinitely, they can sell them, clean up their balance sheets, and focus on new lending. Over time, this also brings more transparency to the financial system because the true scale and value of distressed debt becomes visible.
The Nation said that the average personal loan in Cambodia reached about US$6,500 per borrower by the end of 2025. From one angle, it can be seen as high, but at the same time, it also reflects how access to formal credit has expanded in recent years. At the same time, the share of loans overdue by more than 30 days (PAR30) increased from 7.3% to 8.3%, according to data from Credit Bureau Cambodia. This suggests that some borrowers are under repayment pressure after recent economic disruptions.
However, and again, such changes are common when economies adjust after rapid credit expansion. It is also important to distinguish between liquidity pressure and solvency risk. Rising NPLs may make lending conditions tighter, but they do not necessarily mean that banks lack the capital to absorb losses. Cambodian banks continue to maintain relatively strong capital and liquidity levels, which help protect financial stability. According to a National Bank of Cambodia report, in 2025, the capital adequacy ratio stood at 21.9%, well above regulatory requirements. At the same time, the liquidity ratio reached 177.3% for deposit-taking institutions.
Cambodia is also not alone in facing such adjustments. Several Asian economies have experienced rising household debt pressure in recent years. For example, Thailand had the highest household debt-to-gross domestic product (GDP) ratio in Southeast Asia, according to a report by the Institute of International Finance in late 2023. At about 90% and valued at US$482 billion, it ranks only behind South Korea across Asia as a whole, and well above regional neighbors.
Another point often missed in the discussion is the timing of the policy itself. The introduction of companies that can purchase non-performing loans should not automatically be interpreted as a crisis response. In fact, it can just as easily be understood as a preventive step designed to strengthen the financial system before problems escalate. The policy looks less like a desperate response to rising bad loans and more like a sign of regulatory maturation. It may instead show that the regulator is preparing the system to handle stress more effectively, which is precisely what prudent financial supervision is supposed to do.