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Two labourers carry baskets of rice to be processed and sorted in Kandal province’s Muk Kampoul district
Two labourers carry baskets of rice to be processed and sorted in Kandal province’s Muk Kampoul district last month. Hong Menea

Rice sector credit boost

The government-backed Rural Development Bank (RDB) will lend $64 million to Cambodia’s agriculture sector in 2014, the bank’s top official said yesterday.

Sun Kunthor, president of RDB, said most of the funding would be used to support growth in Cambodia’s rice sector as it strives to meet the government’s export target of one million tonnes by 2015.

“The rice sector needs more than $300 million to reach its full potential,” Kunthor said.

Kunthor added that credit from Cambodia’s commercial-banking sector would also help to fund the remaining investment needed in the industry.

More funding is welcomed by local millers who say it will help stem the flow of paddy lost to neighbouring Thailand and Vietnam. But the RDB will need to make loans more accessible if the industry is to take full advantage of the credit injection, millers say.

“I used to get a loan from the RDB for two years,” said Lim Bun Heng, the president of Loran Company, one of Cambodia’s biggest rice exporters.

“Last year, I sent a loan request to RDB again, but I never heard anything back, so now I only get loans from the commercial bank.”

Lay Ser, a rice miller from Battambang province is another who says that the RDB struggles to compete.

“The interest rate from the RDB is cheaper compared to commercial banks, but I have to pay for the procedure service, in total making it higher than what commercial banks offer,” he said.

Yang Saing Komar, president of the Cambodian Center for Study and Development in Agriculture, said that interest rates in Cambodia were still among the highest in the region, making it difficult for local producers to compete with neighbouring countries.

“If RDB could provide a larger amount of loans and keep the interest rate lower, that would give more benefits to the sector,” he said.

The $64 million credit injection includes $20 million from RDB, $36 million from the paddy rice foundation at the Ministry of Economic and Finance and $8 million from the Bank of China.

In Channy, CEO of Acleda Bank, Cambodia’s largest commercial bank, last month said agricultural lending activities had contributed significantly to the finance sector’s year on year growth.

According to Channy, agricultural related lending increased 28 per cent from $552 million in loans in 2012 to more than $710 million in 2013.

“This growth is mainly contributed by the Rice Policy introduced by the Royal Government in 2010, which can guarantee market conditions for farmers, processors and traders,” he said.

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