ACLEDA president and group managing director In Channy speaking at Agriculture Business Matching event at its headquarters on July 2. SUPPLIED
Locally-owned ACLEDA Bank Plc plans to increase lending to the agricultural sector to tap into its vast export potential, as industry insiders explore innovative methods to overcome the technical and financial constraints to supporting sectoral development, improving productivity, and increasing value-added.
In its latest move towards that goal, the bank held an Agriculture Business Matching event at its headquarters on July 21, attended by local and foreign businesspeople seeking to network and discover new investment opportunities in Cambodian agriculture.
Speaking at the event, ACLEDA president and group managing director In Channy voiced confidence that the gathering would generate plenty of leads for partnerships in the field, especially those involving Japanese investors.
“Cambodia is one of the fastest growing economies in the region. The agricultural sector has played a pivotal role in driving … socio-economic development,” he said, adding that the sector still accounts for a substantial share of employment, which Trading Economics put at 31.15 per cent for 2020.
“Agriculture nowadays plays an integral role in ensuring sustainable food security and nutritious products,in Cambodia and other countries,” he added.
He analogised the bank’s lending to agriculture to taking part in government efforts to promote the field – prioritised as a “key sector” for development – as an engine of economic growth.
In a similar move geared towards funnelling more loans into agriculture, ACLEDA had on May 27 penned a $135 million facility agreement with Japan International Cooperation Agency (JICA) and Sumitomo Mitsui Banking Corp’s (SMBC) Singapore.
More loans for agriculture
As of June 30, the agricultural sector accounted for $1.21 billion, or 20.75 per cent, of ACLEDA’s total loan portfolio, Channy said, noting that as of March 31, the bank represented 34 per cent of the Cambodian banking sector’s outstanding loans to agriculture.
National Bank of Cambodia director-general for banking supervision Rath Sovannorak in October commented that outstanding loans granted by the Kingdom’s financial institutions to the agricultural sector reached $4.2 billion, as of August 31.
And agriculture accounted for 19.3 per cent of the microfinance sector’s 27.5-trillion-riel ($6.8 billion) total loan book as of December 31, at 5.3 trillion riel, he said.
While average loan sizes have gradually increased from year to year, the sector remains dogged by a litany of issues involving matters such as financial literacy, collateral and paperwork, he added.
"Agriculture is a potential sector that plays an important role in supporting national economic growth, and has been rapidly evolving from traditional systems to modern models and agro-industry, through diversification to meet domestic demand and exports.
“This shift requires new human resources and techniques – especially against the backdrop of the global Covid-19 epidemic. Access to financial services for agriculture will be a key driver to enhance the productivity of farmers, farming communities and suppliers, to rehabilitate and boost the national economy," Sovannorak said.
However, Mak Chamroeun, chairman of value chain management company AgriBee (Cambodia) Plc, affirms that access to finance remains a major challenge for many smallholder farmers and other key players in the agricultural world.
Speaking to The Post on July 20, Chamroeun attributed this to over-indebtedness and bad ratings from independent financial information provider Credit Bureau (Cambodia) Co Ltd (CBC), a lack of collateral, and insecure sources of income that undermine borrowers’ abilities to repay their debts.
In this regard, he said, the agricultural community “is fragmented and disorganised, agri-business owners operate outside the business ecosystem. Subsequently, technical and financial support is limited”.
Scaling up valued added
Offering a remedy, he called on lenders to adopt a new lending approach with easier terms and conditions, recommending digital financing solutions that help ensure that the money flows in the agricultural ecosystem and supports the value chain.
Chamroeun pitched his agri-tech company, which he said is on a mission “to improve the wellbeing of Cambodian farmers by facilitating the agricultural process from upstream to downstream”.
By digitising upstream and downstream processes, AgriBee “focuses on building a strong agricultural ecosystem and strives to provide farmers ease of access with our technology to improve their productivity”, he added.
The Ministry of Agriculture, Forestry and Fisheries reported that the total value added in Cambodia’s agricultural value chains grew on average by 2.01 per cent each year from 18.999 trillion riel ($4.75 billion) in 2012 to 20.986 trillion in 2017, before picking up pace to an average 4.2 per cent each year to 24.755 trillion riel in 2021.
The Agricultural Development Policy 2021-2030, currently in its final drafting stage, sets the modest goal of increasing the total value-added of the sector to at least 31.852 trillion riel by 2030, representing an average annual increase of just 2.84 per cent for the nine years to 2030. At the growth rate registered over the four years to 2021, the figure could be expected to pass 35.893 trillion riel by 2030.
Broken down by sub-sectors, crops contributed the lion’s share to agricultural production in 2021, at 57.4 per cent, followed by fisheries (24.4 per cent), livestock (11.4 per cent) and forestry (7.4 per cent) and rubber (5.7 per cent).
