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Logo of Phnom Penh Post newspaper Phnom Penh Post - Prasac borrows $15m from German company

Prasac borrows $15m from German company

Prasac borrows $15m from German company

Assets of Cambodian Microfinance Institution Prasac reached US$210 million with the combination of newly borrowed $15 million from Germany’s Deg-Deutsche Investitions Und Entwicklungsellschaft Mbh (DEG), officials said during the signing ceremony.

The seven-year agreement at an annual interest rate of 5.5 per cent would help Prasac serve loan clients, said Sim Senacheert, president and CEO of the institution.

“This is another step forward for Prasac to be recognised as an outstanding financial institution by international investors like DEG,” according to a statement, adding that with such a long-term loan, Prasac could focus on providing more loans to clients at small- and medium-sized businesses in need of financing for productivity improvements and business expansions.

He said Prasac currently provided the largest loans of any MFI, worth $50,000, at interest rates between 18 to 32 per cent a year depending on the size of the loan. Herbert Jaeger, senior investment manager at the DEG representative office in Bangkok, said that DEG is a member of KFW, which is the second largest bank in Germany in term of assets.

DEG is one of the German government’s sources of financing and investment structuring for the private sector, which assists companies in the developing world in order to contribute to sustainable progress.

He said, “Successful private companies generate growth, create jobs and income for the people by producing competitive goods and provide services.”

MFIs in Cambodia have often been subject to accusations that the interest rates at which they lend are not sustainable.

The Post reported earlier this year that farmers routinely borrowed from MFIs without the financial wherewithall to repay the loans in the future. MFIs have strongly denied these accusations, stating that the micro-banks financed a portion of the country that traditional banks could not reach.

Nguon Sokha, director general and spokeswoman at the National Bank of Cambodia, said that the loans reflect business and economic growth in Cambodia and that the foreign funding for MFIs has been granted on solid criteria.

To contact the reporter on this story: Rann Reuy at [email protected]

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