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El Nino May Crimp Lending to Farmers

Chea Vannak / Khmer Times Share:
A rice feild in Kandal province. hit by drought before last year's harvest. KT/Chor Sokunthea

Lending to farmers will be stricter this year as the El Nino weather phenomenon extends the dry season, executives at microfinance institutes (MFIs) said yesterday.  
 
Climate change is one of the many challenges facing MFIs, said Sim Senacheert, president and CEO of Prasac Microfinance, one of the Kingdom’s largest MFIs. Changing weather patterns are factored into lending to farmers and this year concerns about the longer than usual dry season are adding caution to loans to for agriculture.
 
A prolonged dry spell this year will affect impact productivity on farms and this adds a risk to lending, Mr. Senacheert said.
 
Chea Phalarin, CEO of Amret Microfinance, echoed Mr. Senacheert’s statement, but said long-term loans would be most at risk. “If the agricultural loan is provided for the long term, it would affect risk, but if it is short term, the dry spell will have only a slight impact to MFIs.”
 
About 50 percent of Amret’s total lending is for agriculture, so a prolonged dry-spell could see a fall in loans, Mr. Phalarin said. He did not expect climate change to have a major negative impact on lending, however.
 
Mr. Phalarin did not specify how much of an impact an extended dry season would have on loans to the agriculture sector but said all lending would follow Amret policies and that this would keep risks in check.
 
Mr. Senacheert said farmers often have other sources of income to replay loans to MFIs, and this reduces the risk of nonperforming loans.  “We provide loans in line with our policies and this minimizes risks,” he added.
 
Mr. Senacheert said the announcement of that a prolonged dry season is on the way was an alert the MFI would factor into its lending to farmers.   
 
This year, the dry spell is forecast to extend to late of July or early August, according to an announcement from the Ministry of Water Resources and Meteorology. Most Cambodian farmers rely almost entirely on rainfall due to the lack of irrigation systems in the country, making them more vulnerable than farmers elsewhere to the impact of erratic weather patterns and climate change.
Chan Yutha, spokesman for the ministry, said that the El Nino would last till early August with temperatures shooting up to 42 degrees Celsius.
 
The prolonged dry spell will cause water shortages in provinces where there are few rivers and lakes.  “There will be shortages of water for household consumption as well as farming,” Mr. Yutha said.
 
“If there is no rain, there will be no water for farming,” Mr. Yutha stressed.
 
Following the weather warning, the government called for farmers to shift into dry-weather farming later this year, advising them to carefully conserve any water in storage ponds.
 
Keo Vantha, a farmer in Kandal province’s Sa Ang district who has taken loans from an MFI said she was worried about a lack of water this year.  “If I cannot harvest I cannot repay my loan on schedule,” she said, adding that she was taking a wait-and-see approach to weather warnings.
 
 “We will wait and see what the real situation is. If the hot weather hits hard, we will delay borrowing,” Ms. Vantha said.
 

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