Prime Minister Hun Sen yestersday lashed out at the opposition party’s concerns over the interest rates charged by commercial banks to farmers.

SRP lawmaker Yim Sovann said commercial banks in Cambodia charge customers very high interest rates, and said it is much higher than in other countries.

“So far it’s three per cent per month, the highest in the world. You can look at Thailand, Vietnam – they can borrow at a very low rate.  You can see now at the commercial banks, some okhnas [millionaires] and business people can borrow at less than one per cent a month because they have collateral, but the farmers also have collateral. They [banks] said the only reason that leads to the high interest rates is corruption and bureaucracy,” he said.

“We do not force the bank to reduce the interest rate, but we [want to] force the ones that are corrupt to curb corruption. When we reduce the bureaucracy, I think we can reduce the interest rate.  The reason that leads to the high interest rates is not about the market price, it is about the corruption and bureaucracy,” added Sovann.

However, the premier, speaking at the opening of a new rubber processing plant in Stung Treng province said Sovann’s words do not apply with the market practice and the real situation in Cambodia’s economy.

“If it is one per cent, [they will] kill the banks. We have to check who will run crazy businesses. The bank takes deposits and give an interest rate of five per cent ... I can explain the reason as the market economy.

Based on the market economy, they don’t allow the state to handle commercial bank. We have a national bank which cannot provide that serivce to customers. If people have money to deposit at the bank, they will get five per cent, some give four per cent and other 5.6 per cent [interest rate],” said Hun Sen.

“If the bank got the main source of their capital from deposits, the bank gives an interest of five per cent and then the bank will take the money to offer loans [charge an interest rate] of one per cent, the bank will die – no one does business like this,” he added.

“To lower the interest rate to one per cent, it would kill the bank ... They are against the political protectionism,” he said.

The premier also said that currently the government is working with the banks to provide loans to rice millers.

“The government is trying to lower the acceptible rates in the banking sector. [We] cannot force the bank,” said the premier.

In Channy, president and CEO of Acleda Bank, the largest commercial bank in the country, said the commercial banks cannot charge interest on loans below deposit rates.

“If the people deposit with us, we pay them five per cent per year. We cannot provide any loan for which the interest charge is lower than deposit rate. There is no bank in the world can provide lower interest rate [loan], even in the United States,” he said.

According to the statistics from the National Bank of Cambodia, the Kingdom’s 32 commercial banks have lent $5.49 billion to about 1.6 million borrowers by November 2012, up 30 per cent year-on-year.

On the deposit side, the banks received $6.02 billion from 1.9 million depositors by November 2012, up 24 per cent year-on-year.

Additional reporting by May Kunmakara