The government plans to step in as a guarantor between Cambodia’s commercial banks and the capital-starved rice sector, officials confirmed yesterday.
Mai Vireak/Phnom Penh Post
A farmer harvests rice in Kambol commune, in Kandal province’s Ang Snuol district, in December last year.
The Ministry of Economy and Finance plans to guarantee US$25 million as collateral for loans to rice millers, Kalyan Mey, an advisor at the Supreme National Economic Council, said yesterday.
Cambodia’s rice millers often lack the capital to purchase large quantities of paddy rice or build rice processing plants.
They also fall short on the collateral needed in order to secure loans from commercial banks.
The government guarantee against defaults in the rice sector is hoped to boost production and push the country closer toward Prime Minister Hun Sen’s directive for exporting 1 million tonnes of milled rice by 2015.
Kalyan Mey said the $25 million would provide more loans to local rice millers, increase production, and extend the industry’s processing capacities.
“The government is consistently helping the milled-rice sector now,” he said, adding the effort would start as soon as March.
Experts and officials said on Monday that falling rice prices in the region had exposed the high costs of Cambodian milled rice production and its uncompetitiveness on international markets.
Rice orders at the Kingdom’s rice mills saw a significant drop in January compared to the year before, experts said
Lim Bun Heng, president of the Cambodian Milled Rice Export Association, praised the project.
“If the government really goes forward with this project, it would help to export milled rice faster, especially since our rice millers generally lack the capital to do it themselves,” he said.
President and CEO of ACLEDA Bank In Channy supported the initiative as well.
However, the bank has not yet signed any contracts, saying it has already been loaning a lot to rice millers for years.
“The policy will help commercial banks feel more comfortable with offering loans to the sector on a more regular basis,” he said.
“We will eventually offer more loans to the sector, but the increase depends on our growth,” he added.
ACLEDA provided some $166 million last year, representing about 16.5 per cent of its total loan portfolio and 116,645 customers.
Of the loan, $10.5 million was given to 451 rice millers.
The sector needs a $600-million input to buy, process and transport 1 million tonnes of milled rice, the Rural Development Bank said on Monday.
The bank has lent $36 million to the sector so far.
Vong Bun Heng, owner of a rice mill in the capital’s Steung Meanchey district said financial difficulties had made it hard to for him and fellow rice millers to buy paddy, causing it to be exported to neighbouring countries.
Many farmers spend so much money trying to increase their capacity that they don’t have enough left to buy paddy, he added.
He said that although he will participate if the policy materializes, $25 million is too small an amount, capable of insuring only around four or five rice mills.