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Logo of Phnom Penh Post newspaper Phnom Penh Post - MFI increases loans as economy grows

MFI increases loans as economy grows

As rising economic growth spurred demand for personal loans, Prasac, Cambodia’s biggest microfinance institution (MFI), provided $106 million in loans between March, 2012 and March, 2013, an increase of 66 per cent compared with the corresponding period a year earlier.

Additionally, Prasac’s net profit increased by 19 per cent during the first quarter of this year, compared with the equivalent period of 2012.

Prasac president and chief executive Sim Senacheert attributed the boost in loans to rising economic growth and an increase in new clients.

“Loans [were] mainly used for service and trade activit-ies, representing 44 per cent; followed by agriculture, [accounting for] 30 per cent; and personal loans, [accounting for] 23 per cent,” he said.

Meanwhile, non-performing loans also increased slightly, from 0.16 per cent as of March 2012 to 0.19 per cent at the end of March this year.

But this slight increase was not yet a concern, Senacheert said. The newly established credit bureau would prevent over-indebtedness among clients, he said.

Prasac’s number of borrowers rose 22 per cent to 143,274 by the end of last month, and deposits hit $90 million.

This year, Prasac expects its loan portfolio to grow by 55 per cent.

But with more than 30 MFIs in the country, Cambodia’s microfinance industry is a crowded one.

Experts say this could lead to borrowers taking multiple loans from different MFIs, which may lead to over-indebtedness.

According to a study released this month on microfinance borrowing in Cambodia, “The sharp growth of the sector has resulted in substantial competition, and there have been concerns that it may be leading to cross-lending and, possibly, over-indebtedness of borrowers.”

“Having multiple loans increase a borrower’s odds of being over-indebted by six times, specifically when the borrower has three or more outstanding loans,” the research by the Cambodia Institute of Development has found.

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