Cambodia's large commercial banks have begun competing with each other by raising deposit rates, with the annual rate at several banks rising to 8 percent in November, a record high.
Experts say the annual deposit rate was as low as 5 percent prior to the global financial crisis, which saw a tightening of credit among lenders in the wake of a sub-prime mortgage collapse in the US.
Facing limited capital from outside lenders, commercial banks are seeking to bring in more local capital, experts say.
"To avoid the financial crisis, we have to increase our local deposits," said Phan Soneary, vice president and executive director of Acleda Bank. "Not only can [the capital from deposits] support loans, but also other missions of the bank."
Foreign lenders have restricted their loans, while the number of new depositors has fallen, she said. Acleda recently raised its annual deposit rate 1 percent, to 7.5 percent.
Meanwhile, banks such as ANZ Royal, Cambodia Public and Canadia have also increased their deposit rates, to 8 percent annually.
It is not uncommon for banks to adjust their rates up or down, said Pal Nay Im, general director of the National Bank, but currently banks have to make themselves stronger.
The deposit rates are climbing, but annual interest rates on loans remain between 12 percent and 15 percent.
The increase of local deposit rates is the only way to help banks extend their capital when foreign partners are reluctant to provide loans, said Chheang Meng Heak, banking and finance expert at the Royal University of Law and Economics.
"Foreign lenders aren't offering any loans now, because they are worried about lacking their own cash," he said. "They do that just because they are concerned that their financial system could face a crisis."
However, Oung Ming Tech, deputy director-general of Cambodia Public, said his bank was not facing a financial problem, because it depends wholly on its parent bank in Malaysia. Cambodia Public had increased its deposit rate to maintain local customers, he said.
"You have to look at market demand. It is a very competitive market," he said. "We have increased the rate so that we can get more money deposits. If not, we will lose our customers."
Nearly 640,000 Cambodians deposited money in local banks in the first six months of 2008, an increase of 12 percent over the same period the year before, according to the National Bank.
However, the continuing worldwide financial crunch will likely reduce the number of depositors, said economist Kaong Chandararoth, head of the Cambodia Institute of Development Study.
Banks who cannot compete with the rising deposit rates will be forced to close, he said.
Jeremy Ha, director of Phnom Penh Commercial, said his bank would not be able to follow the rates of the larger banks.
"As a new bank, we have tried to attract new customers, but we have no plan to increase the deposit rate because we cannot do like other large banks," he said. "I am also worried about this problem."
Other small banks, however, said they were preparing to increase their deposit rates as much as they could—and hoping the world's financial woes soon will pass.