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Logo of Phnom Penh Post newspaper Phnom Penh Post - Farmers get lift from loans

Farmers get lift from loans

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Local lenders agree to increase loans to the agriculture industry in a bid to expand the sector and shield farmers from the global finance crisis

Photo by: HENG CHIVOAN

Vendors sell rice in Phnom Penh. The government hopes to contain the impact of the global market crisis through agricultural loans.

THE Kingdom's agricultural sector will get a much needed boost from local banks, which on Wednesday announced plans to greatly increase agriculture loans in a bid to cushion the country from the global economic crisis.

"We hope the loans will provide extra money to expand the agricultural sector and help with the development of the economy," In Channy, president of Acleda Bank, told the Post.  

In Channy said he will increase agricultural lending to US$114 million next year, more than double the $56.4 million Acleda has loaned so far in 2008.

He added that interest rates on the loans varied between 18 to 24 percent for small loans and 15 to 18 percent for larger loans.

The agricultural sector is Cambodia's largest industry, contributing 28.5 percent to GDP last year.

Son Koun Thor, president of the government-owned Rural Development Bank, said Wednesday the bank has issued $22 million in loans to support the agricultural sector, principally short-term loans at eight percent interest to farmers.

"We hope that next year, loans for the agricultural sector will increase, but we haven't provided detailed figures yet because we are waiting for government approval," he said.

The increase in agricultural lending follows a recommendation from Prime Minister Hun Sen to the Finance Ministry last year to encourage commercial banks to use the loans to boost national economic growth.

However, Khaou Phallaboth, president of the Khaou Chuly Group, which deals principally in the rubber and rice sectors, said Wednesday that 15 to 24 percent interest rates on agricultural loans were too high.

He said the loans were "a long-term investment" and that the "maximum interest rate for agricultural sector loans must be 15 percent or less".

Tal Nay Im, director general of the National Bank of Cambodia, said Wednesday the bank is encouraging more agricultural lending but could not provide details. She  defended the high interest rates, saying they are a result of the risks associated with the sector.

"Interest rates for agricultural loans may drop when infrastructure improves and banks have greater trust in the sector," Tal Nay Im said.

Acceptable terms

Som Yen, director of the Malai Trading Co and a member of the Banteay Meanchey Chamber of Commerce, said his farmers association has borrowed from the RDB to provide loans to provincial farmers at acceptable terms.

"In 2008, we loaned about $800,000 to nearly 600 farmers throughout the province, at an interest rate of about 10 percent per annum," Som Yen said.

"The interest rate is acceptable to farmers, and there is low risk - only about three percent have failed to pay or defaulted due to natural disasters related to their crops this year," he said.

Cambodia has vast swaths of under-used agricultural land, the development of which is expected to raise living conditions for farmers and reduce rural-urban migration.

"In 2009, we project an increase of 20 percent in loans to farmers in our province to further expand their productivity," Som Yen said.

Yang Saing Koma, president of the Cambodian Centre for Study and Development in Agriculture (CEDAC), said banks should target their agricultural loans at individual farmers and farm associations, rather than large companies.

"I think that for Cambodia, loans to the agricultural sector should be granted at an interest rate of one percent per month. This rate is affordable for farmers and would provide long-term expansion to the sector," he said.

John Brinsden, Acleda bank's  vice chairman, said he was confident the global economic crisis would not prevent the bank from increasing agriculture loans.

"Credit has become more difficult to raise, but agricultural loans are not a large sum," he said.

ADDITIONAL REPORTING BY GEORGE MCLEOD 

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