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Logo of Phnom Penh Post newspaper Phnom Penh Post - Banks spared flooding woes

Banks spared flooding woes

Banks spared flooding woes

Cambodia's banks should be largely spared the heavy damages already seen in many parts of the Kingdom’s economy, officials said yesterday, though microfinance lenders will feel some impact.

Minister of Economy and Finance Keat Chhon last week revised downward the government’s gross domestic products for 2011 as a result of the floods, to 6 per cent from an earlier 7 per cent. While there was potential for that constriction to also affect the banks, which loan to most sectors of the economy, officials tempered the concern.

The agriculture sector by far has seen the most significant impact from the floods, with about 318,900 hectares of rice, or 13 per cent of the country’s total crop, having been affected, according to National Committee for Disaster Management figures released last week.

However, that sector represents a small portion of banks’ overall loan portfolio, National Bank of Cambodia director general and spokeswoman Ngoun Sokha said yesterday. Banks lend significant sums to industry, trade and services companies, but she said only 10 per cent of total loans go to agriculture firms.

“Our financial industry will not be impacted,” she said, adding bank operations would continue “normally.”

Agriculture accounts for 15 per cent of ALCEDA Bank’s loan portfolio, according to president and CEO In Channy, and therefore should have little effect on the bank as a whole.

He said ACLEDA specifically spreads its loan risk in anticipation of flood season, in addition to its typical loan diversification, “to avoid accidental risk.”

“We know the floods happen every year, and we know what areas it will impact. So we diversify our loans to other sectors,” he said, acknowledging the seasonality of agriculture loans.

A number of domestic banks echoed In Channy’s sentiments, however, the largely agriculture-focused microfinance industry did voice some concern.

Cambodian Microfinance Association chairman Chea Phalarin said he didn’t yet have exact figures on the flood’s effect on MFIs, he did note the industry’s vulnerability. Still, he reckoned most MFIs – and their clients – would be able to survive the season.

“We won’t get too much impact, just a little,” he said. “I think our performance in the fourth quarter will also be okay.”

NBC’s Ngoun Sokha agreed with Chea Phalarin, given the industry’s exposure to agriculture. And again, she pointed to MFIs as being a small piece of a much larger industry, therefore their effect was minimal.


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