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Logo of Phnom Penh Post newspaper Phnom Penh Post - MFIs fear cash drought

MFIs fear cash drought

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p13_story1.jpg

Officials say the international financial crisis may be hitting local

microfinance institutions,  forcing them to re-evaluate program

expansion

PHOTO SUPPLIED

A couple in Kandal province signs a loan with a representative with one of Cambodia’s microfinance institutions.

CAMBODIA'S micro-finance institutions (MFIs) say lower foreign investments in the wake of a global financial meltdown will affect their ability to meet lending targets.

"We will not ... reach our target number of customers, but we hope to meet more than 80 percent of customers' [credit] needs," Hout Ieng Tong, chairman of the Cambodia Microfinance Association, told the Post Tuesday.

He said steady loan repayments should limit the impact of market turbulence in the United States and the European Union by partially funding new loans.

Delayed or suspended credit contracts could also hit liquidity, he said, but added that direct losses by Cambodian institutions were unlikely because of low exposure to foreign stocks.

Chea Phalarin, general manager of Amret Ltd, said a drop in cheap credit would also affect the expansion of lending services.

"Currently, we are lending US$3 million per month to 200,000 customers in 14 provinces," with average total loans of $600, he said.

"We plan to expand services to four additional provinces in the next three years and countrywide in six years, but we need about $20 million per year to do this," Chea Phalarin said.

Sim Senacheert, general manager of Prasac Microfinance Institution, said foreign lenders are less able to extend credit abroad.

"We are having a hard time finding cheap sources of financing because lenders cannot find enough money," he said.

He said only long-term, high-interest loans remain available.

"I think we can only reach about 80 percent of our 60 percent target growth rate this year," he said.

Bun Mony, general manager of Cambodian Entrepreneur Building (CEB), said all MFIs in Cambodia face similar credit problems, as foreign banks are increasingly refusing to extend long-term credit to one another.

He added that CEB is now looking for more local investments to bridge the gap.

"We need about $20 million in credit from overseas [this year], but that amount could drop to $15 million by 2009," he said.

Kang Chandararot, president of the Cambodia Institute for Development Study, said foreign-funded development projects in the Kingdom could further insulate the country from turbulence abroad.

"Cambodia would face less of an impact if it were able to keep big development projects throughout the country to preserve the economic circuit," he said. But he added that lending shortfalls could put additional strain on the local economy as consumers struggle to cope with rising inflation rates.

Son Koun Thor, president of the Rural Development Bank, said greater confidence in lending institutions could encourage consumers save more.

"If we have more savings, we will have greater sources for financing, as long as consumer confidence holds for our banks and microfinance institutions," he said. 

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