DISCUSSION
Interview with H.E Dr. Serey Chea, Deputy Governor, The National Bank of Cambodia
April 28, 2023
Dr. Serey Chea, let’s start our interview with a little bit about your background. You have demonstrated leadership by enabling various initiatives and one of them was introducing financial literacy education in the general education curriculum. What encouraged you to introduce this program in the education system and how do you see it grow in the near future?
I was recently promoted to the deputy governor of the National Bank of Cambodia which is the central bank. Before that, I was with the banking supervision and then I moved to another general directorate in charge of the payment system, economic policies, and international cooperation but even after moving on, I still feel passionate about financial literacy and the reason for it was in a way quite personal.
First, I never wanted to work in banking, I wanted to be an astronaut because I was fascinated with a movie called the X-Files, and the catchline of the X-Files is “the truth is out there” and I wanted to find the truth. So, the teenage me wanted to do that, when I told my father that I wanted to study astronomy or something related to that field, he said, “you won’t find a job in Cambodia because we are not going to launch anything anytime, probably not in my lifetime”. He was very conservative. Then I told him that I wanted to be an architect. I wanted to build.
To which he said, “well it’s going to be quite difficult because you will be working a lot in the construction field with a lot of male workers and you’re a woman, it’s not going to be easy”.
Well then, I asked what is it you want me to do? He said, “why not accounting? It’s good for girls because you go work at eight and come home at five. It’s an easy job”.
So, I did accounting, but I didn’t really pay a lot of attention to it. But after I joined banking, I started a job in auditing because it was banking supervision and I found it quite boring. But one day, I had the chance to go for an onsite visit to a province and we did a “triangular check” where we check the documents offsite, so the bank will send the documents to our office, we look at them, and then go onsite to double check if everything is fine, and the third part is to go and visit the client and see whether they have actually taken out the loans as described in the balance sheet of the financial institution.
So, I met this family who was recounting her story about getting access to her first financing, she said thanks to that first loan which allowed her to grow her business, she now can send her children to school, and of course eventually to start working, and now the family’s living standard has really improved.
That’s when I realized that my job is actually not boring because I could change a life by doing my job well, by making sure financial institutions are following the rules and are sustainable, so that they can lend more money so that these people can have a better chance of improving their lives.
So, my understanding of access to finance started there. Access to finance can be quite tricky because you also should not push loans on people who don’t need them because then it creates different problems. My job is to impose rules, because people may not understand whether they need loans or not, but the private sector will keep pushing loans to them, so, it’s very important to realize that people in rural areas may not be financially literate. The only way to help raise understanding is through a formal education system for children.
That’s when we started talking to the Ministry of Education, who was very cooperative and forthcoming. We reached an understanding that we would include financial literacy into the general education program, so children from grades 1 to 12 will be able to learn aspects of finance, how to calculate interest rates, what are their rights if they go to a bank, what are their obligations and responsibilities if they take up a loan, etc. These are things that are not apparent to many people who are financially uneducated.
These are very important aspects and we managed to do it. Now as deputy governor, I continue to support that with even more ability to influence that part of the policy.
First, I never wanted to work in banking, I wanted to be an astronaut because I was fascinated with a movie called the X-Files, and the catchline of the X-Files is “the truth is out there” and I wanted to find the truth. So, the teenage me wanted to do that, when I told my father that I wanted to study astronomy or something related to that field, he said, “you won’t find a job in Cambodia because we are not going to launch anything anytime, probably not in my lifetime”. He was very conservative. Then I told him that I wanted to be an architect. I wanted to build.
To which he said, “well it’s going to be quite difficult because you will be working a lot in the construction field with a lot of male workers and you’re a woman, it’s not going to be easy”.
Well then, I asked what is it you want me to do? He said, “why not accounting? It’s good for girls because you go work at eight and come home at five. It’s an easy job”.
So, I did accounting, but I didn’t really pay a lot of attention to it. But after I joined banking, I started a job in auditing because it was banking supervision and I found it quite boring. But one day, I had the chance to go for an onsite visit to a province and we did a “triangular check” where we check the documents offsite, so the bank will send the documents to our office, we look at them, and then go onsite to double check if everything is fine, and the third part is to go and visit the client and see whether they have actually taken out the loans as described in the balance sheet of the financial institution.
So, I met this family who was recounting her story about getting access to her first financing, she said thanks to that first loan which allowed her to grow her business, she now can send her children to school, and of course eventually to start working, and now the family’s living standard has really improved.
That’s when I realized that my job is actually not boring because I could change a life by doing my job well, by making sure financial institutions are following the rules and are sustainable, so that they can lend more money so that these people can have a better chance of improving their lives.
So, my understanding of access to finance started there. Access to finance can be quite tricky because you also should not push loans on people who don’t need them because then it creates different problems. My job is to impose rules, because people may not understand whether they need loans or not, but the private sector will keep pushing loans to them, so, it’s very important to realize that people in rural areas may not be financially literate. The only way to help raise understanding is through a formal education system for children.
That’s when we started talking to the Ministry of Education, who was very cooperative and forthcoming. We reached an understanding that we would include financial literacy into the general education program, so children from grades 1 to 12 will be able to learn aspects of finance, how to calculate interest rates, what are their rights if they go to a bank, what are their obligations and responsibilities if they take up a loan, etc. These are things that are not apparent to many people who are financially uneducated.
These are very important aspects and we managed to do it. Now as deputy governor, I continue to support that with even more ability to influence that part of the policy.
What role does the digital currency project “BAKONG” play in building a sustainable society in Cambodia?
“BAKONG” is the name of one of our 9th-century temples. When Cambodia got its independence in 1953, we decided to build an independence monument as a replica of the Bakong temple, so for us, Bakong as a project is also a symbol of independence and national pride. It’s not itself a digital currency per se, it’s the backbone payment system. The technology used is a distributed ledger and so people sometimes get confused about it, but whatever we call it serves the purpose that it’s meant to serve.
Firstly, it helps interoperability and helps connect different banks and payment system institutions together. Before Bakong existed, bank customers could send money within their own ecosystem, and could also send money to other customers within the same bank. So, basically, you can’t do a cross-institutional transfer unless you have two or three institutions that have set up a bilateral or trilateral agreement in which you would be able to do that.
But on a larger scale, there are pockets of development happening and they were not talking to each other. So, you must understand that people who have bank accounts are more affluent, they are employed and salaried. Then we have a payment service provider which provides e-wallets, and people who use these services are usually people in rural areas with low incomes because it’s easy to open, and they don’t really have to maintain that much by themselves.
The problem was that these two institutions were not able to send money to each other and this was unconsciously creating a societal divide between urban and rural. Having Bakong as a backbone payment system and allowing people to easily send money to each other breaks down the wall between urban and rural, affluent, and less affluent so people are within the same ecosystem. So, that’s the first part.
Secondly, when we promote financial inclusion, we wanted to make finances more affordable, convenient, and easy. So, by creating this interoperability amongst different financial institutions, they are not only able to put money in the bank account but also make payments directly from the same bank account using a QR code and send money to anyone without having to withdraw cash or banknotes from the ATM. That creates ease and convenience for people to want to be part of this ecosystem. So, affordability, security, and convenience are very important factors when we set up the Bakong system.
Firstly, it helps interoperability and helps connect different banks and payment system institutions together. Before Bakong existed, bank customers could send money within their own ecosystem, and could also send money to other customers within the same bank. So, basically, you can’t do a cross-institutional transfer unless you have two or three institutions that have set up a bilateral or trilateral agreement in which you would be able to do that.
But on a larger scale, there are pockets of development happening and they were not talking to each other. So, you must understand that people who have bank accounts are more affluent, they are employed and salaried. Then we have a payment service provider which provides e-wallets, and people who use these services are usually people in rural areas with low incomes because it’s easy to open, and they don’t really have to maintain that much by themselves.
The problem was that these two institutions were not able to send money to each other and this was unconsciously creating a societal divide between urban and rural. Having Bakong as a backbone payment system and allowing people to easily send money to each other breaks down the wall between urban and rural, affluent, and less affluent so people are within the same ecosystem. So, that’s the first part.
Secondly, when we promote financial inclusion, we wanted to make finances more affordable, convenient, and easy. So, by creating this interoperability amongst different financial institutions, they are not only able to put money in the bank account but also make payments directly from the same bank account using a QR code and send money to anyone without having to withdraw cash or banknotes from the ATM. That creates ease and convenience for people to want to be part of this ecosystem. So, affordability, security, and convenience are very important factors when we set up the Bakong system.
The backbone payment system “BAKONG” is being developed jointly with a Japanese fintech company Soramitsu. How did you come to develop the project with a Japanese company?
I think it was sort of serendipity in a way when we found Soramitsu. As a policymaker, I set my ideas and vision clearly. My IT and technical staff would go and figure out the available technology to help us achieve the vision that we set for ourselves, and that vision has a lot of constraints. So, we needed a system that would help us achieve that. So, after a lot of research, and found Soramitsu perfectly aligned with our goals.
It was a mobile application-based technology, and we wanted to push access to finance through the mobile phone because we have 20M mobile phone subscriptions for a population of 16.7M, so it was logical for us. Whatever technology it is, the medium must be a mobile phone. They were also using a programing language my IT team could understand well, a very simple system that the Cambodian team could understand and co-develop. We really didn’t want something that was already made and too sophisticated. We don’t have a very sophisticated system so, I used to compare it to getting a Ferrari on a rural road, you can drive fast with the Ferrari, but if you don’t have the proper infrastructure for that, it would be useless.
Soramitsu fits those criteria, for developing countries like ours and also allowed the team to co-develop and understand and eventually scale the system by us with very little dependency on Soramitsu. Additionally, when they started with us, I used to joke with my colleagues that as they are a startup and we are a small developing country, we are in the same boat. If they are not successful in this, nobody else would want to work with them. As for us, if we are not successful, it would be a waste of time and financial resources which we don’t have a lot. So, in a way, it was a very good match where we understood each other well. Now I think they have gone on and developed a similar project in other countries as proof that they did a great job in Cambodia.
It was a mobile application-based technology, and we wanted to push access to finance through the mobile phone because we have 20M mobile phone subscriptions for a population of 16.7M, so it was logical for us. Whatever technology it is, the medium must be a mobile phone. They were also using a programing language my IT team could understand well, a very simple system that the Cambodian team could understand and co-develop. We really didn’t want something that was already made and too sophisticated. We don’t have a very sophisticated system so, I used to compare it to getting a Ferrari on a rural road, you can drive fast with the Ferrari, but if you don’t have the proper infrastructure for that, it would be useless.
Soramitsu fits those criteria, for developing countries like ours and also allowed the team to co-develop and understand and eventually scale the system by us with very little dependency on Soramitsu. Additionally, when they started with us, I used to joke with my colleagues that as they are a startup and we are a small developing country, we are in the same boat. If they are not successful in this, nobody else would want to work with them. As for us, if we are not successful, it would be a waste of time and financial resources which we don’t have a lot. So, in a way, it was a very good match where we understood each other well. Now I think they have gone on and developed a similar project in other countries as proof that they did a great job in Cambodia.
Were there any challenges you might have faced in terms of language or technology?
Well, not really, in fact, the team worked together well. In the case of language, what we inherited from Soramitsu is that in our wallet, there are now three languages our local language, English, and Japanese, so, it was a gift from Soramitsu - the more the merrier! Eventually, it will help people to encourage to learn a foreign language and better understand Japan.
Do you see any possibility of collaboration with Japan in the future to establish a digital economy in Cambodia and other Southeast Asian countries?
Oh, definitely! There are a lot of ways we can collaborate. Japan, as you already know is very well advanced in technological innovation. We are a developing country; we want new technology to enable us to jump to the next level. I definitely see that more cooperation could happen between the two countries in any space – whether it’s financial, or AgriTech. I do see it as a big opportunity for Japanese companies to explore.
But the other important thing to highlight is that Cambodia, at the moment, is like a blank page and many new technologies can be tested here without any existing system. It is very interesting for Japanese companies to come and invest in Cambodia because there is nothing, and the best-case scenario is that you come and try, there are limited rules and regulations which can be good or bad, but you have to see the positive side that it will give plenty of opportunities to explore. Our approach is that we want to see what happens and then we regulate, rather than try to be perfect at the start by restricting innovative ideas that come in. I hope this is something the Japanese government and Japanese companies consider in their decision and try to find out which destination to go to.
At last, I want to say because of the successful launch of Bakong, Soramitsu is propelled to find other projects in Southeast Asian countries and the Pacific region. So, we have to take credit for that.
But the other important thing to highlight is that Cambodia, at the moment, is like a blank page and many new technologies can be tested here without any existing system. It is very interesting for Japanese companies to come and invest in Cambodia because there is nothing, and the best-case scenario is that you come and try, there are limited rules and regulations which can be good or bad, but you have to see the positive side that it will give plenty of opportunities to explore. Our approach is that we want to see what happens and then we regulate, rather than try to be perfect at the start by restricting innovative ideas that come in. I hope this is something the Japanese government and Japanese companies consider in their decision and try to find out which destination to go to.
At last, I want to say because of the successful launch of Bakong, Soramitsu is propelled to find other projects in Southeast Asian countries and the Pacific region. So, we have to take credit for that.
