State-owned Rural Development Bank, now a specialised banking institution, will become a commercial bank and change its name, Prime Minister Hun Sen revealed last week.
The bank will become the ‘Rural Development and Agriculture Bank’ during the second half of the year and begin operating as a commercial bank, Mr Hun Sen said during the Government-Private Sector Forum on Friday.
He said changing the name of the bank will help reinforce the bank’s mission to promote the development of the agriculture sector.
“The Rural Development Bank has been doing a good job, but their capacity and capital to help the agriculture sector are limited.
“With the intention to strengthen the bank’s capacity and to serve the government’s policy to develop the agriculture sector and rural areas, I have decided to change the bank’s name to ‘Rural Development and Agriculture Bank’.
“The bank will now play a bigger role as a commercial bank and as a bank that serves the government’s policy,” said the prime minister.
Mr Hun Sen said $50 million will be injected into the bank to complete the transition into a commercial institution.
Kao Thach, Rural Development Bank CEO, told Khmer Times that he has been working with a team of experts and an accounting firm to complete the transformation.
“I welcome the government’s decision to make the bank into a commercial institution.
“We will now be able to issue letters of credit to local milled rice exporters and other agriculture firms just like a privately-owned commercial bank.
Mr Thach clarified the role of the bank under the new name: “This [change] doesn’t mean we are allowed to compete with other commercial banks as we are still owned by the government.
“The difference between us and other institutions is that we serve the government’s policy and will disburse high-risk loans to help the development of local agriculture,” he said.
Mr Thach said he is now working with an independent accounting firm to prepare the documentation needed for the change and to apply for a license to operate as a commercial bank.
“As a commercial bank we will have more capital to invest in new crops and help the government boost exports of agricultural products,” he added.
Mr Thach said the bank’s interest rates and loan requirements will not change.
“Our interest rates are not lower than those of other commercial banks. The only difference is that we take more risks to promote growth in the agriculture sector,” he said, adding that the transformation will be completed during the second half of the year.
With private banks tightening lending to the sector, Chan Sokheang, chairman and CEO of Signatures of Asia, a local rice exporter, said he welcomes the news.
“Private commercial banks are cutting lending to the agriculture sector by 40 to 50 percent because of fears surrounding the European Union’s revision of Cambodia’s special trade status.
“We are very happy with this decision by the government,” he added.