'KB Cambodia at tipping point of explosive growth'

KB Kookmin Cambodia headquarters in the Doun Penh District, Phnom Penh / Courtesy of KB Kookmin Bank

This is the fourth of a series highlighting Korean banks' operations in Southeast Asian countries. _ ED.

KB unit plans to open 2 new branches every year

By Nam Hyun-woo

Park Yong-jin, president of KB Cambodia

Domestic banks are trying to make their presences felt in Southeast Asia, and KB Kookmin Bank's battlefield is Cambodia, which is the lender's “test bed” for expansion in the region.

KB Kookmin Bank Cambodia opened in 2009 through the launch of its headquarters in the Doun Penh District of the capital Phnom Penh. After seeing the growth potential, the bank set up two branches in the city, one in the Toul Kork District in 2013 and another in the Toul Tompong District this February.

According to Park Yong-jin, president of KB Cambodia, the bank is at a “tipping point of explosive growth” as its business is picking up notable momentum.

“KB Cambodia competes mostly with medium-sized banks here and we got ahead of them last year as our assets grew significantly,” Park said in a recent interview with The Korea Times.

In 2016, KB Cambodia saw its assets rise 77 percent to $130 million from the previous year. This was the third-highest growth rate among 123 financial firms in Cambodia.

“A huge growth potential lies in the Cambodian economy, while its system is less developed than that of Korea. It is natural that Korean firms should focus on the Cambodian market,” Park said.

As of July 2016, Cambodia's population stood at 16 million, and its per capita gross domestic product (GDP) had reached $1,200.

Like the economic size of the country, its financial market is relatively small, with the assets of 52 commercial banks and 71 micro finance firms in the country totaling $27.7 billion.

According to Park, Cambodia’s financial system is also underdeveloped, as transfers between different banks are still unavailable while only 17 percent of Cambodians use banks.

“The economy uses the U.S. dollar mostly, so the exchange risks are relatively small,” Park said. “The local authorities’ regulations on foreign direct investments or foreign currency are relatively soft, allowing the ratio of foreign capital in its financial firms to reach 65 percent.”

Park also agreed that the economy is not big enough for big firms like KB Financial Group or KB Kookmin Bank to seek huge profits through big investments.

“But the country’s economy has been growing 7.7 percent every year for the past two decades,” he said. “Plus, the country has friendly policies toward foreign investment, giving us opportunities to run pilot projects. This makes the country a good test bed in achieving our attempts to tap into Southeast Asian countries.”

Following the recent growth, the bank will open another branch in the second half of this year and add two more next year in Phnom Penh.

After that, the bank plans to expand its network outside of the capital city, opening two branches every year until 2020.

'Liiv KB Cambodia'

Also encouraging KB’s business in Cambodia is the country's rising smartphone penetration.

According to a 2016 study by the Asia Foundation, 96 percent of Cambodians own mobile phones and 48 percent have smartphones.

The country's mobile environment is growing fast and the government is striving to accelerate the growth, coming up with the Master Plan 2020 to set up the infrastructure for better access to the internet through smartphones.

Even though Cambodians are not familiar with transactions without cash, they are savvy at installing apps and surfing the internet through their smartphones. This offers an opportunity for the bank to introduce its mobile banking platform Liiv KB Cambodia, Park said.

The application is based on a system similar to an electronic wallet. Clients can transfer money with the recipient's name and mobile phone number through the app.

Cambodians love it because their banks do not provide inter-bank transactions.

Since the app features cross-border remittance, Cambodians in Korea can send money to their home without visiting bank outlets in person.

"The app already has 18,000 users. It’s a huge number given the Cambodian culture of relying on transactions through cash," Park said.