The Rural Development Bank disbursed more than $170 million in loans to the agriculture industry last year, with nearly 70 percent of the money going to the rice sector, an RDB official said.
For in depth analysis of Cambodian Business, visit Capital Cambodia
Kao Thach, RDB’s CEO, told Khmer Times that last year the bank gave loans to more than 40 local rice millers and exporters.
All of the loans will be repaid this year, he said. Money disbursed through the government-led emergency fund, around $50 million, will be paid back by May, while the rest of the loans will likely be fully repaid by June or July, Mr Thach said.
“We are not afraid of borrowers defaulting. This is not a concern for us. We are confident that rice millers and exporters will pay back loans on time even despite difficulties related to the recent imposition of tariffs in the European Union,” he said.
Mr Thach urged commercial banks to ease requirements for firms in the rice industry and to make more credit available, arguing that RDB alone cannot meet the credit needs of the industry.
“We alone cannot support the sector and make it more competitive. We ask commercial bank to get more involved. We need more involvement from the private sector,” he pleaded.
“Our loans help stabilise rice prices, but commercial banks also need to contribute. Commercial banks are now distancing themselves from agriculture, creating more barriers for rice millers and exporters to access funds,” Mr Thach said.
“We agree that they must exercise caution when disbursing loans, but they should also play a role in boosting the competitiveness of the sector. Using paddy rice as collateral is not risky,” he said, suggesting that the Central Bank intervenes to increase banks’ incentive to lend to agricultural firms.
Chan Pich, general manager of Signatures of Asia, a local rice exporter, echoed Mr Thach’s remarks, pointing out that access to finance is decreasing, with commercial banks less willing to lend to the agriculture sector.
“Commercial banks are cutting credit to rice millers and exporters while increasing requirements,” Mr Pich said, adding that the interest rate is now 9.5 percent per year.
Last year, total exports of milled rice decreased by 1.5 percent, reaching only 626,225 tonnes, which were sent to 61 different countries around the world. China is the biggest market for Cambodia’s milled rice, absorbing about 270,000 tonnes in 2018.
Last month, Chinese president Xi Jinping said his country’s import quota for Cambodian rice will be increased to 400,000 tonnes for 2019, an increase of 100,000 tonnes.