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Micro Lenders See Steady Expansion

Khmer Times Share:
The National Bank of Cambodia has called for more capital requirements from MFIs. Supplied

Loans and deposits in the Kingdom’s crowded microfinance sector rose about 10 percent during the first quarter of the year from the same period last year, according to a report from the Cambodia Microfinance Association, which put the rise down to an expanding economy.  
 
Outstanding loans from the association’s members – 45 microfinance institutions (MFIs) and seven nongovernmental organizations that offer micro loans – surpassed 12.8 trillion riel ($3.1 billion) in the first quarter of this year, up about 8.4 percent from the 11.9 million riel ($2.9 billion) in total lending in the same period last year. Deposits rose about 11.1 percent in the first quarter to more than 5.8 trillion riel (about $1.4 billion), from almost 5.3 million riel ($1.3 billion) in the first quarter of last year, the report said.
 
These figures exclude micro loans from Acleda Bank – the Kingdom’s largest bank in terms of branches and customers – which is a member of the association.   
 
Huot Eng Tong, the association’s newly appointed chairman said the uptick in lending and deposits reflected economic growth and small businesses’ need for capital to expand.  
 
“Credit growth is responding to the needs of borrowers and this shows that the economy is still expanding,” said Mr. Eng Tong, who is also president of Hattha Kaksekar Microfinance. He added that stability and a growing economy are driving the need for more loans.
 
Chea Phalarin, chief executive officer of Amret Microfinance, said the MFI saw credit growth surge to $478 million in the first quarter of this year from about $400 million in the same period last year, while deposits jumped from about $200 million in the year-ago period to $227 million in the first quarter of this year.
 
Mr. Phalarin said most of Amret’s customers were farmers and micro, small and medium sized enterprises focused on agriculture. Rising trust in MFIs is helping to draw more customers, he added.
 
Mr. Phalarin said the prolonged drought would not affect borrowers’ ability to repay because borrowers were vetted before they received loans to ensure their ability to repay. He also said that falling interest rates were giving customers more value for their loans.   
 
Sim Senacheert, president and CEO of Prasac MFI, said its deposits grew about 11 percent, from $467 million the first quarter of last year to $517 million in the same period this year. Lending rose about 7 percent, from $850 million to $919 million year on year, he said.
 
Mr. Senacheert said deposits were growing at a higher rate than loans because trust and interest rates were rising. The MFI offers 7 percent per year interest on deposits in US dollars.  
 
Sok Voeun, chief executive officer of LOLC Microfinance, said credit was expanding stably at about 12-13 percent a year. It rose $25 million from $188 million in the first quarter of last year to $214 million in the same period this, he said. The MFI saw a surge in deposits since being granted a license by the National Bank of Cambodia to accept deposits at the end of last year. Deposits rose to $6 million by the end of March, Mr. Voeun said, adding that the MFI projected this would reach $15 million by the end of the year.
 
The Ministry of Economy and Finance expressed concern about fast credit growth at MFIs, which charge high interest rates, in mid-February. It said it was closely watching for risks to the economy and consumers.  
 
A report from ministry put annual interest rates for loans at MFIs at 31.6 percent in 2013, 30 percent in 2014 and 28.5 percent in 2015. By comparison banks charge annual interest rates of about 16.2 percent on loans, the report said.
 
Cambodia Microfinance Association chairman Mr. Eng Tong said the trend to lower interest rates would continue but there would be no dramatic declines. Although MFIs are competing with each other by offering lower rates they are constrained by the fact that operating costs are high. Moreover, MFIs pay high rates of interest to raise funds internationally so that they can make loans, he explained.
 
The National Bank of Cambodia issued a prakas (directive) on March 23 calling for a rise in the minimum capital requirements for MFIs. Deposit-taking MFIs were given two years to raise their minimum capital requirements from the current $2.5 million to $30 million, while the rest will have to raise their minimum capital requirements from $62,500 to $1.5 million within the same period, according to the prakas.  

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