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Give Farmers a Break: PM

May Kunmakara / Khmer Times Share:

Prime Minister Hun Sen yesterday called on banks and microfinance institutions (MFIs) to suspend loan repayments by borrowers affected by this year’s drought, or either make the loans interest free or cut the rates.

“Financial institutions and banks need to work closely with MFIs to find some concessional methods to help drought-affected farmers who are unable to make loan repayments,” Mr. Hun Sen said on his Facebook page. 

To prevent people from having their homes and land seized, he said loan repayments should be delayed, made interest free or have the interest rate reduced. Water shortages have been severe this year, and rice farmers have been hardest hit – both dry- and wet-season farmers, the prime minister said. He also urged officials to pump more water into rice fields to prevent rice paddies from being damaged. 

Some 234,695 hectares of rice fields in 16 provinces were affected by drought as of the beginning of October, according to the latest data from Ministry of Agriculture.  
An official from Ministry of Environment said previously, Cambodia would lose about 1.5 per cent of its gross domestic product (GDP) every year by 2030 due to climate change, and that the loss would rise to 3.5 per cent of GDP a year by 2050. 

In Channy, president and Group CEO of Acleda Bank, told Khmer Times that the bank has not received any claims from farmers affected by drought. “We don’t have any customers who are affected by drought or flood. We have experience with natural disasters like floods and drought, so we have established risk-prevention measures to help farmers,” Mr. Channy said. 

Mr. Channy also said that rice farmers had other sources of income they could rely on. “Our famers don’t only rely solely on rice, but they also have others types of farming that they can turn to, like raising animals, vegetable farming and other crops. So, these options can provide borrowers with various sources of income,” he said. 

“We don’t lend to farmers who only plant rice, but we recommend they also consider raising animals or growing vegetables or other crops. Our bankers who are responsible for farmers’ loans regularly go onsite to check whether they are following our advice to help prevent them from becoming a risk. 

If they still face a problem, we will assess their ability to repay and determine whether they get an additional loan or not,” Mr. Channy said. 

Acleda’s loans to the agriculture sector represent about 20 per cent of the bank’s total outstanding loan portfolio of $2.4 billion, amounting to about $400 million. Of this 20 percent, 18 per cent is for growing crops, including rice, cassava and vegetables and the rest if for raising animals and fish. 

A report from National Bank of Cambodia shows that the number of people with access to financial services is surging. By the end of June about 2.3 million of Cambodia’s total population of 15 million had access to financial services. 

Economist Srey Chanthy noted that banks and MFIs are able to extend further loans to their borrowers on confirmation that the borrowers have additional ability to repay. “However, it can be difficult for commercial banks and MFIs to suspend the collection of repayments from borrowers. Suspension of repayments by borrowers could affect their operations, and as profit-making entities they may be reluctant to do so,” he said. “What they may be able to do is to extend current loan repayment periods and to reduce the interest rate on current loans.”

According to a World Bank report, Cambodia’s agricultural growth slowed to less than 2 percent in 2013-2014. The sector has to grow 5 percent a year over the next 15 years to keep real farm incomes growing. With 5 percent growth, farm wages are projected to triple from $1,200 currently to $3,760 in 2030. Growth of 3 percent would increase incomes to only $2,500 by 2030.

The World Bank recently announced that it could increase its climate funding by one-third to 28 percent of its operations from 21 percent now – an increase to $16 billion a year from $10.3 billion.

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