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Logo of Phnom Penh Post newspaper Phnom Penh Post - 90pc without bank services, says official

90pc without bank services, says official

High interest rates and difficult-to-access locations make credit out of reach for most

10%

Access to banking
Despite efforts to increase lending to the poor, about 90 percent of

Cambodians have no access to credit and are often forced to rely on

high-interest, informal lending through the country's loan sharks

ONLY a fraction of Cambodia's estimated 14 million people have access to official banking and finance institutions, leaving most owners of small and medium-sized businesses at the mercy of private lenders and sky-high interest rates, a government bank official said last week.

"Around 10 percent, or 1.3 million people, can borrow money from the banking system," said Tal Nay Im, director general of the National Bank of Cambodia (NBC).

"The rest borrow unofficially from private lenders at extremely high interest rates that pose a threat to their business activities," she added.

The latest figures indicate that Cambodia has 630,000 commercial account holders and about 670,000 clients of microfinance lending organisations, according to Tal Nay Im.

From January to October this year, commercial banks provided US$2.4 billion in loans, Tal Nay Im said, citing a report from the NBC.

However, the bulk of those loans are often for investing in corporate ventures.

She acknowledged that lending places major burdens on borrowers, particularly owners of small and medium-sized businesses, who play a vital role in Cambodia's economy, by requiring collateral such as land or home titles.

This is a major challenge for poor people, and

small and medium-sized enterprises.

"This is a major challenge for poor people, and small  and medium-sized enterprises, but it is the only choice for borrowing money from the banking and finance sector," she said.
High interest a barrier

Sam Rainsy Party lawmaker Yim Sovann criticised Cambodia's lending institutions, accusing them of caring more about collateral than the financial health of borrowers or their ability to repay loans.

"In Cambodia, people can borrow money ... only if they have valuable assets, land or house titles," he said, adding that "they get loans of only about 10 percent to 20 percent of the value of their collateral".

He said the government should prohibit banks from requiring farmers to use their land as collateral and urged help for farmers looking to obtain credit.

"In developed countries, interest rates are very low ... and before lending money, the banks help people determine whether they or their business will be able to successfully repay the loan," Yim Sovann said.

Progress being made

But In Channy, president of ACLEDA Bank, told the Post last week that the figures cited by NBC were encouraging and showed the progress of Cambodia's banking sector.

He added that through November of this year, his bank had loaned $463 million to 227,354 customers, with annual interest rates between 15 percent and 24 percent, while maintaining an additional 401,810 depositors.

ACLEDA plans to increase its loans by a projected 50 percent in 2009, while seeing a 20 percent gain in depositors, In Channy said.

But even with total loans increasing, NGOs say the poor still have little or no access to inexpensive credit.

A November 2008 report by NGO Forum on Cambodia titled "Community Finance" said that loans from banks and MFIs are still too expensive and difficult to access for many Cambodians.

"Interest rates of MFI service providers for community credit loan[s] still remain high at five percent in rural areas.

"This ... denies the poorest and most vulnerable from access to loans," the report said.

The report, by Cambodia's largest NGO umbrella organisation, also said that the loan conditions, such as requirements for collateral, also were a barrier to social mobility.

Hoy Sophea, secretary general of the Cambodia Microfinance Association, told the Post Tuesday that through September of this year, MFIs loaned $260 million at interest rates of between 24 percent and 36 percent annually.

"Of course, these interest rates are high compared to developed countries, but if compared to neighbouring countries such as Vietnam and Laos, they are competitive," he said.

"Interest rates for MFIs are acceptable. If we were to compare them to unofficial lenders, their rates would be much cheaper," Hoy Sophea added.

Fixed Deposit Interest Rate (26 December 2008)

Name of Banks
Interest Rate
3 Months
6 Months
12 Months

USD

Riel

USD

Riel

USD

Riel

ACLEDA

5.50%

6.00%
6.50%
8.00%
7.50%
9.50%
ANZ Royal
4.55%

4.60%

5.25%
5.55%
5.40%
6.70%
Cambodia Asia Bank
5.50%
N/A
6.50%
N/A
7.50%
N/A
Cambodia Comercial Bank
3.00%
3.00%
3.25%
3.25%
3.25%
3.25%
Cambodia Mekong Bank
2.50%
N/A
3.25%
N/A
3.50%
N/A
Cambodia Public Bank
5.25%
N/A
6.25%
N/A
7.25%
N/A
Canadia
5.00%
5.00%
6.00%
6.00%
7.00%
7.00%
May Bank
2.00%
N/A
2.50%
N/A
3.25%
N/A
SBC Bank
3.00%
N/A
3.50%
N/A
4.50%
N/A
Vattanac Bank
4.25%
N/A
5.25%
N/A
6.00%
N/A

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