Less capital from abroad means that microfinance institution growth may drop by to much as half in the coming year, industry sources say
Photo by: Heng Chivoan
A teller in a bank in Phnom Penh. Microlenders expect slower growth next year, but are still confident that the sector will remain isolated from the global economic crisis.
MICROFINANCE institutions say they expect lower growth next year, expanding by no more than 50 percent, due to the deepening global financial crisis, revising down expansion estimates of as high as 100 percent.
But despite the downturn, double-digit growth during the last three years should cushion the impact of the worsening credit crunch, and most lenders say that a hike in interest rates is unlikely.
"We will be OK for the next few years, but we plan to reduce our rate of growth in the next year," said Chea Phalarin, general manager of Amret Microfinance.
He said Amret expansion would be between 20 percent and 50 percent, down from earlier estimates, but that the health of the sector was generally good.
"Amret will face no shortfall in financing from outside creditors or investors," he said.
"We can find enough sources of capital for 2009," Chea Phalarin said.
We are still growing, but not at the 20 to 40 percent we had predicted.
Amret last week received US$4 million in loans from the French Development Agency, or AFD, which will support up to 20,000 additional clients, he said, adding that Amret currently has 230,000 clients.
Chea Phalarin said Amret has already lent $54 million to micro-, small and medium-sized businesses in 14 provinces.
While the bank had hoped to expand its lending to $80 million in 2009, Chea Phalarin said loans would now only reach $65 million to $70 million, largely because of defaults on loans as the garment, tourism and agricultural sectors continue to suffer from a slowdown in markets abroad.
"If we lend too much, we will have trouble controlling risk. So, for my institution, we have to be very careful in targeting future growth rates," Chea Phalarin said.
Say Sony, marketing manager for Prassac Microfinance, which has lent $57 million to 98,000 clients, agreed that the world's market meltdown would affect lenders locally, but marginally.
"We are still growing, but not at the 20 to 40 percent rate we had predicted for next year," he said.
Despite the slowdown, lenders said that an interest rate hike was not likely if overseas creditors did not put pressure on local microfinance institutions.
"We don't have a serious problem yet. Most of our financing comes from Europe, not from the United States," Say Sony said.
"Once creditors propose new rates for us, we will have to consider increasing our interest rates for borrowers as well."
Amret's Chea Phalarin, however, said the company is aiming to maintain its rates of between 2.25 and 3.0 percent.
But others said Cambodia's microfinance sector had to also actively protect itself from overseas credit turmoil.
"We hope we can become more independent, so that donors won't always be supporting MFI institutions," said Kea Borann, a member of the Cambodia Microfinance Association (CMA) board of directors.
The CMA will begin training sessions led by foreign lending professionals in a bid to strengthen the sector against outside forces.
"We have played a large role in organising much-needed training programs for microfinance institutions. If all MFIs continue to improve the quality of their service, they should be able to avoid any future crisis," he said.
At a conference on microfinance and the financial crisis held in November, delegates said they were relatively safe from the international upheavals.
"The strongest message from the conference was that deposit-taking MFIs are well-insulated from refinancing risks," said a report from the conference.
It added that panic over the global banking situation has been largely limited.
"Large-scale savings withdrawals have occurred only in isolated cases where other factors were already at play beyond the financial crisis," the report said.