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Banks asked to fund farming

  Workers in a paddy field outside Siem Reap. BLOOMBERG
Workers in a paddy field outside Siem Reap. Prime Minister Hun Sen on Thursday urged banks to increase lending to the agricultural sector to help the slowing economy. BLOOMBERG

Prime Minister Hun Sen calls on banking sector to boost agriculture after last month’s four-percent cut in the central bank deposit requirement

Prime Minister Hun Sen appealed to bankers Thursday to make the most of last month's decision by the National Bank of Cambodia to cut the reserve rate requirement from 16 percent to 12 percent by maximising lending to the agricultural sector.

The Central Bank decision means that the private banking sector need only keep reserves of 12 percent in the national bank, which has freed up loan capital. The requirement had previously been 16 percent.

Speaking at the 3rd Cambodian Economic Forum at Raffles Le Royal hotel, the premier said this could help boost the rural economy to help compensate for the economic downturn.

"The government wishes to appeal to bankers to lend this extra four percent ... to the agricultural sector, especially rice millers," he told the forum.

"This year, Cambodia has produced too much rice, and we lack stocks, we lack money to buy rice from farmers, and this is a problem that I always say ... we already have ‘gold', but we don't have the paper to pack it."

Hun Sen said that last year the government lent US$12 million to private millers through the Rural Development Bank and that this year loans increased to $18 million in order to buy rice stocks. The government has raised the rice-stock requirement from 400,000 tonnes last year to 500,000 this year in a move it said was designed to further food security.

Phou Puy, president of he Federation of Cambodian Rice Miller Associations, said that the Rural Development Bank loans to buy rice and improve milling capacity are taken out at a preferential interest rate of five percent.  

"We can buy around 100,000 tonnes of rice from farmers for storage this year - a 40 percent increase compared to last year," he told the Post.

Canadia Bank, one of the largest in the country, said last week it had withdrawn $190 million as a result of the reduced reserve requirement, capital that bank President Pung Kheav Se said would be made available as loan capital, suggesting that the banking sector was already following the call made by Hun Sen at Thursday's forum.

Canadia would "target agriculture and small and medium enterprises", rather than the real estate sector, which he termed "risky".

Bou Ros, chief of the Credit Committee and head branch manager at Canadia Bank, said that its lending to the agricultural sector would rise from $32 million in 2008 to a projected $100 million this year.

ACLEDA Bank's Senior Vice President of Head Credit Division In Siphann said Thursday that it would also heed the prime minister's call to prioritise the agricultural sector, increasing loans to farmers by "60 percent to about $105.6 million". ACLEDA lent $35 million to the agricultural sector in 2007 and about $66 million in 2008, he said.

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