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MFI deposits seen growing

A man walks in front of the office of Hattha Kaksekar Ltd
A man walks in front of the office of microfinance company Hattha Kaksekar Ltd in Phnom Penh Wednesday, Nov. 8, 2012. Pha Lina

The value of deposits with Cambodia’s 31 microfinance institutions grew more than 96 per cent in the first nine months of the year compared to last year, a rise industry experts say is due to the political stability and economic growth of the Kingdom.

Official data from the Cambodia Microfinance Association (CMA) showed total loans outstanding rose by 25 per cent ending September to $808 million compared to $644.64 million at the end of last December while total deposits reached $225 million compare to $114.61 million. The figures excluded micro-loans from Acleda Bank.

The main industry players said that the biggest contributions to industry’s growth were Cambodia’s macro-economic stability and increasing public confidence in the industry.

Sim Senacheert, president and CEO of Prasac, one of Cambodia’s largest MFIs, said the rise of loans and deposits in the MFI industry are mainly reliant on the growth of the economy. He noted the increase in personal loans and loans to small and medium enterprises over the first nine months of this year.

Additionally, the industry is trying to offer flexible loan products, simplify its procedures and increase its convenience to its clients by broadening its network nationwide, he said.

Prasac’s loan portfolio rose 46.39 per cent from $151 million to $195 million at the end of September 2012, while the number of borrowers increased by 3.75 per cent from 125,000 clients to 130,000 clients.

Total deposits with Prasac increased 463 per cent from $5.97 million to $33.63 million over the first nine months of this year.

Chea Phalarin, president and CEO of Amret MFI also highlighted strong business performance. However, competition is becoming tougher, he said.

“Well, we’ve got a very stable macro economy this year so our business operations have been going smoothly over the period. Loans outstanding grew more than 30 per cent to $128 million at the end of September while our savings have grown beyond our initial forecast to $77.2 million, a jump of more than 80 per cent – this year we are the leading deposit collecting institution among all the others,” he said.

“Even though the European financial crisis is still occurring, it does not affect the industry. You see, the economic activities are growing a lot across all sectors this year and we expect economic growth to be 6.5 to 7 per cent up from last year.”

General manager of Hattha Kaksekar Limited, Hout Ieng Tong, also agreed that the current improvement of Cambodia’s economy is pushing the strong growth of the sector.

“At the end of September, our growth is going as planned. Loans rose by around 35 per cent to $95 million and deposits taken totaled $50 million, up from $17 million and our non-performing loan [NPL] rate is declined to 0.1 per cent, at the end of December last year it was 0.5 per cent,” he said.

However, the increase in newcomers to the industry is an issue facing existing players.

“Tough competition is the main challenge, but we overcome it because we have long-term experiences and good relationships with our clients, diversified lending products, a large operational area, large office network and good management systems such as core banking, ATMs and internal controls,” said Hout Ieng Tong.

Data from the CMA show the NPL rate for the whole industry increased to 0.3 per cent over the first nine months of 2012, up from 0.2 per cent from December last year.

The NPL rate at Amret rose to 1.1 per cent from 0.07 per cent while Prasac’s NPL increased from 0.14 per cent to 0.23 per cent.

“Although the NPL slightly increased, it is not of concern yet and it is expected that the portfolio will remain good because our clients’ businesses are good and the implementation of the credit bureau will also prevent the over-indebtedness of the clients as well,” said Sim Senacheert.

To contact the reporter on this story: May Kunmakara at kunmakara.may@phnompenhpost.com

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