Logo of Phnom Penh Post newspaper Phnom Penh Post - Agriculture to see lending growth

Agriculture to see lending growth

Agriculture to see lending growth

120126_07

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.

MOST VIEWED

  • Angkor Wat named as the top landmark for the second year

    Travel website TripAdvisor has named Cambodia’s ancient wonder Angkor Wat as the top landmark in the world for the second year running in their Travelers’ Choice Award 2018, an achievement Cambodian tourism operators expect will attract more tourists to the Kingdom. The website uses traveller

  • New US bill ‘is a violation of Cambodian independence’

    After a US congressmen introduced bipartisan legislation that will enact sanctions on Cambodian officials responsible for “undermining democracy” in the Kingdom, government officials and the ruling Cambodian People’s Party on Sunday said they regarded the potential action as the “violation of independence and sovereignty

  • Hun Sen detractors ‘will die’

    Prime Minister Hun Sen on Wednesday said those who curse or insult him would eventually die without a plot of land to bury their bodies after being killed by lightning, suffering the same fate as those who recently died in Thmar Baing district in Koh

  • Ministry’s plan for net sparks fears

    The government has ordered all domestic and international internet traffic in the Kingdom to pass through a Data Management Centre (DMC) that has been newly created by the state-owned Telecom Cambodia, in a move some have claimed is an attempt to censor government critics. Spokesman