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Agriculture to see lending growth

Agriculture to see lending growth

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Some commercial banks could increase loans to the agricultural sector this year, according to industry insiders who cited improvements in the sector and a rise in crop prices.

Heng Chivoan/Phnom Penh Post
Workers unload corn from a truck at a warehouse in Pailin province in December.

Cambodian farmers lack the capital needed for inputs such as seeds and fertiliser, while domestic rice millers often can’t get credit to purchase large quantities of paddy, insiders said.

Experts have long said the dearth of loan activity in Cambodian agriculture stymied the sector’s development toward an economy of scale.

ACLEDA Bank, Cambodia’s largest domestically owned bank, would increase its loan portfolio in agriculture, which now represents about 16.5 per cent of its total lending, Executive Vice President So Phonnary said.

“We see greater potential and higher product prices now in both the domestic and global markets. We always make year-on-year increases to loans in this sector,” she said.

Of the US$166 million in agricultural loans from ACLEDA, $10.5 million went to about 450 of the country’s rice millers, she said, noting the higher risk associated with lending to the sector.

ANZ Royal Bank and Korean-owned Kookmin Bank also expected to increase lending to agriculture.

Stephen Higgins, CEO at ANZ Royal, didn’t give a figure for proposed increases but said the country’s advantages in the sector would be a source of growth in the coming years.

Agricultural loans make up about 10 per cent of Kookmin’s $24 million total loan portfolio, the bank’s CEO and president, Jang Ki-Sung, said. That number is set to increase this year, he said.

Milled rice exports grew by about 22 per cent in 2011, the Post reported yesterday. The Kingdom shipped about 170,000 tonnes worth $103 million of the processed grain abroad last year.

Although some banks had made loans more accessible to local rice millers and farmers, strict requirements from banks were still a barrier, Son Koun Thor, president of the state-owned Rural Development Bank, said.

“We have money for [farmers] to borrow, but they have problems receiving loans if they don’t have clear business plans, exact cash flow or collateral.”

Lim Bun Heng, president of Loran Import-Export Co, a rice milling company, claimed that while his company was able to access more credit, the interest rate had also increased.

“Those commercial banks help us a lot, but their interest rate is still high compared to neighbouring countries, where banks charge around 3-4 per cent. Here they charge 10 per cent per year,” he said.

“If they lowered rates to around 5-6 per cent per year, we would have a better chance of getting other loans to increase our production capacity,” said Lim Bun Heng.

The ability among farmers to repay loans made agricultural lending risky, ACLEDA’s So Phonnary said.

“We’re very careful in providing loans to the sector. It is high risk because rice millers and farmers don’t have clear business plans,” she said, adding that this was why lenders charge high interest rates to the sector.

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