Social and economic context
Despite sustained growth since 1997, and global improvement of the macro economic situation, Cambodia's social context is characterised by poverty and growing inequalities between rural and urban areas. In 2006, 84 percent of the population of 14 million lives in rural areas in Cambodia, where they engage in various agricultural activities, in handicrafts, in small-scale trading and in services.
Living standards for Cambodians have improved over the past decade, in large measure due to a robust economic growth averaging around 7% per year since 2001, combined with the restoration of peace, and improved access to services. However, in 2007 per capita GDP is estimated at USD 592, which remains low compared to other countries of the region.
Even if improvements have been registered in economic and social sectors, inequality has actually risen during the last decade. In 2007, 90% of the poor live in rural areas where the rates of poverty reduction and real per capita consumption gains have been much slower than in the urban areas. The current sources of economic growth are garments and tourism, which have limited relevance to the rural economy. This growing disparity stresses the importance of a targeted rural development strategy.
Banking and microfinance sector
The Cambodian banking sector is still underdeveloped and fragile, contributing very little to the economy of Cambodia, and failing to provide the needed financial services. Commercial banks are mostly based in Phnom Penh and in eight provincial towns.
In a country where banks suffer from widespread public distrust, the rapid expansion of microfinance institutions is encouraging.
The microfinance industry in Cambodia is the most dynamic in South East Asia. Strong and fast growing commercially oriented microfinance institutions have been built and it is considered that microfinance has become the most sophisticated component of the national financial system. Competition is growing among MFIs but the unmet demand for loan products and adapted financial services, especially saving products, remains high.