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Talking rural financing

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Rural Development Bank chairman and chief executive Son Koun Thor speaks to reporters at his Phnom Penh offices. Photo by: HONG MENEA

THE Rural Development Bank services and refinances loans for financial institutions working in Cambodia’s less developed rural communities, mainly in the agriculture sector. Since its launch in 1998, the bank has grown its lending capital to $36 million from just $2.5 million.Post reporter Sieam Bunthy spoke with RDB chairman and chief executive Son Koun Thor about the strength of the Kingdom’s lending industry and Prime Minister Hun Sen’s goal of exporting 1 million tonnes of rice by 2015.

What is the difference between the Rural Development Bank and other private banks? And what is RDB’s visions for itself going forward? 
RDB is a state-run specialised bank with the kinds of financial services any other bank would have. We offer low-interest rates, or rates similar to those offered by private banks. RDB’s vision is to be the key institution serving the rural development community, focusing mainly on the agricultural sector in order to boost the national economy and push private banks to grant loans to the sector to further still more growth. 

Who are RDB’s customers? 
At first, RDB granted loans to micro-institutions, but we later shifted focus to small and medium-sized enterprises and the farming sector. The bank does not give loans to people directly, but instead goes through microfinance and other financial institutions. 

What are the strong and weak points in Cambodia’s agricultural sector? The strong points of Cambodia’s rice products specifically are the lack of chemical fertilisers used in growing the crop, which is recognised internationally. Also, we enjoy duty-free status from the European Union, and the labour force here is still cheap. As for weaknesses, rice production here is limited, and high electricity prices make that production more expensive.

Do you think Cambodia will be successful in reaching Prime Minister Hun Sen’s goal of exporting 1 million tonnes of milled rice by 2015? 
We believe that the policy will be successful because the government is taking the steps necessary to reach that goal, including supporting rice millers and export companies in ways that will give them the ability to process that amount of rice. Also the government is doing its best to attract foreign investment, and our rice exports are already on the rise.

How is RDB contributing to the attainment of that 2015 goal? 
We have made an active contribution to the prime minister’s policy, namely by providing about US$30 million in loans this year to rice millers and small and medium-sized enterprises. We also have an additional $6 million ready to be loaned out. At the same time, we have co-operated with banks such as ACLEDA, Canadia and ANZ Royal to offer loans to businesses involved in rice production. But we’ve found that insufficient collateral held by borrowers, as well as poorly prepared loan documents, have been big obstacles to being able to offer loans in Cambodia.However, we have been able to find ways around those obstacles, such as by requiring borrowers to stock a specific amount of rice as collateral. Another condition is requiring them to use loans for rice production, or the purchase of rice for production, rather than for exporting it.

What else will RDB do to help meet the rice policy goal between now and 2015? 
We will continue granting loans to producers and vendors who run businesses in this sector and urge private banks to increase their loan issuance. We also hope these related businesses will co-operate to improve the Kingdom’s rice production logistics to become more efficient.

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