Non-Performing Loans in Cambodia’s Microfinance Sector: Challenges and Implication for Sustainable Economic Growth
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Abstract
This study investigates the impact of Non-Performing Loans (NPLs) on Cambodia’s economic growth, utilizing panel data analysis with annual data from 62 microfinance institutions over the period 2017-2023. Data sourced from the National Statistics Institution of Cambodia, National Bank of Cambodia, and World Bank. The results show that NPLs have a significant negative effect on Gross Domestic Product (GDP) growth. In contrast, inflation is found to have a positive relationship with GDP growth, suggesting that moderate inflation may stimulate economic activity. Furthermore, government regulations are shown to have a positive influence on GDP growth, highlighting the importance of a well-structured regulatory environment. These findings emphasize the need to strengthen financial sector stability, carefully manage inflation, enhance regulatory frameworks, and encourage sectoral diversification to ensure sustainable economic growth in Cambodia. The study also underscores the importance of further research to better understand the mechanisms underlying the relationship between these variables and economic performance.
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