Cambodia's lenders are nursing their worst loan books in a decade, as a stalled property market squeezes a heavily dollarised banking sector already under US sanctions scrutiny.

The gross non-performing loan (NPL) ratio climbed to 8.6% in 2025, its highest in 10 years, and analysts expect it to push above 10% this year as an energy-price shock feeds through to households and exporters. Commercial banks alone saw bad loans rise to 8.3% from 7.2% a year earlier.

For a country where private credit runs at more than 120% the size of the economy, that is a warning worth heeding. Cambodia built one of the fastest-growing banking systems in the region on the back of a property boom; the boom has faded, and the sector is now working through the debt it left behind, all while Washington leans on Phnom Penh over the scam compounds laundering money through its financial plumbing.

“Credit growth within the banking system remained low… driven by subdued demand for loans, particularly in the real estate sector, and more cautious lending practices,” National Bank of Cambodia (NBC) Governor Chea Serey said as first-half lending crawled 2.9% higher in 2025.

Property drags on the loan book

The rot starts in real estate. Growth in the sector slowed to 0.5% in 2025 and average property prices fell 3.6%, ending years in which cranes over Phnom Penh had been the surest sign of the boom.

Cambodia's borey market of gated housing estates tells the same story. As of June, some 590 projects around the capital had been completed but 133 sat unfinished and 35 had been deferred as developers slowed building to match softer sales. Some schemes have been abandoned after developer insolvencies, with buyers in a few cases offered plots of land in place of the homes they had paid for.

The strain shows in the numbers. Roughly 9% of $5.7bn of outstanding loans that were restructured, about $1.9bn, had been rescheduled to stop asset quality deteriorating faster, and by the end of 2025 outstanding small-business loans reached $37bn, with 7.1% of them more than 90 days past due. Delinquency was heaviest in construction and working-capital lending, the credit that had fuelled the building spree.

The scam-compound shadow

Cambodia's other problem is reputational, and it reaches into the banks. On October 14 the US Treasury's Office of Foreign Assets Control (OFAC) designated the Prince Group as a transnational criminal organisation, the largest action yet against Southeast Asia's scam networks, tied to more than $16bn in US victim losses.

PRINCE BANK PLC – a sanctioned entity – was named in that designation as owned or controlled by Prince Group chairman Chen Zhi, who has since been stripped of his Cambodian citizenship. It is not a healthy blue-chip lender but a bank under OFAC sanctions, and is treated here strictly as such.

The clean-up has spread. The NBC placed three banks – CCU Commercial Bank, Heng Feng Cambodia Bank and HH Bank – under liquidation on August 1, after OFAC sanctioned executives linked to them over alleged ties to cyber scams and money laundering. The three hold about 0.5% of banking assets, and 51 institutions have now been wound up or had their licences revoked since 1990 with 23 entering liquidation between 2020 and 2026.

Huione Pay, a subsidiary of Cambodia-based Huione Group, lost its Cambodian licence and was cut off from the US financial system after parent group Huione Group was linked to laundering more than $4bn. Huione Pay later emerged as H-Pay. The turmoil spilled into rumour: Cambodia's banking associations had to publicly reject viral claims that the US had frozen funds in local banks, calling them false and damaging.

Big banks hold the line

The core of the system, for now, looks sturdier than the headlines suggest. The sector's capital adequacy ratio stood at 22.3%, among the highest in Southeast Asia, and net NPLs were held near 2.4% with provisioning covering about 70% of bad loans.

ACLEDA Bank Plc (CSX: ABC), the country's largest and only listed lender, kept its NPL ratio at 6.9%, below the sector average, and its shares have driven a record run on the Cambodia Securities Exchange. National Bank of Canada-owned ABA Bank, the biggest by assets, reported a higher 8.1%, with Canadia Bank at 7.9% and Korea's Woori-owned KB Prasac at 8%.

Together with Sathapana Bank, those names – alongside Vattanac Bank, Phillip Bank and the state-linked Foreign Trade Bank of Cambodia (FTB) – anchor a crowded field. The top five banks control just under half of all assets, and with 59 commercial banks still competing, analysts at Yuanta Securities argue consolidation is “no longer optional… a strategic necessity for the long-term health and competitiveness” of the industry. Two-thirds of banks, they note, struggle with weak profits and thin scale.

Dollars, riel and a young exchange

Most of these figures are already in dollars because Cambodia is one of the world's most dollarised economies, with the greenback dominating deposits and lending. That limits the NBC's room to act as a lender of last resort, though the central bank is chipping away at it: the riel gained 1.5% in 2025 to average KHR4,011 to the dollar as digital payments in local currency spread.

Microfinance, long the frontier of Cambodian credit, has kept growing even as it strains borrowers. Outstanding loans passed $6bn in 2025, up more than 15%, serving 1.53mn borrowers, most of them women, though NPLs in the segment remain high at close to 15%.

Capital markets are still in their infancy. The Cambodia Securities Exchange, part-owned by the Korea Exchange, saw average trading value jump more than 90% y/y in 1H26 and its index gain 7.7%, off a tiny base of barely 6,000 active investors. In insurance, Forte Insurance holds roughly 44% of the general market, a rare domestic champion in a foreign-heavy financial sector.

The buffers are real. Foreign reserves held at $25.3bn in mid-2026, enough for eight months of imports, and the Asian Development Bank has approved a $250mn loan to cushion households from the fuel-price shock. Cambodia's banks have absorbed a property downturn and a sanctions storm without a systemic scare. The test now is whether they can grow out of their bad loans before the next shock lands, and whether Phnom Penh can convince Washington its financial system is no longer a laundromat for the region's scammers.