COMMERCIAL banks yesterday said they welcome a larger role for Microfinance Institutions in the Kingdom, following an announcement that the National Bank of Cambodia had granted a deposit licence to VisionFund Cambodia.

VisionFund is at least the seventh MFI to receive a deposit licence, and has announced interest rates on certain deposits as high as 10 percent – higher than what many commercial banks offer in Cambodia.

But commercial banking officials say MFIs target different markets, and offer a way to extend banking to the Kingdom’s large unbanked population.

ACLEDA Bank President In Channy said he applauded the decision to grant deposit licences to MFIs.

“If more MFIs can receive deposit taking licenses from the NBC, it means they can increase the flow of money into the financial system.”

Rather than people storing money at home, it could be put to use in loans, which generate revenue, he said.

“It is good for the whole industry, because MFIs have a lot of branches at the grassroots level, which can broadly mobilise funds.”

Although ACLEDA has the largest network of branches in Cambodia, In Channy downplayed competition concerns, claiming increased choice was important for customers.

An NBC prakas, on licensing of microfinance deposit-taking institutions, requires the institution to have minimum paid-up capital equal to 10 billion riel (US$2.4 million), along with strong financial conditions and sound management.

So far, at least seven MFIs have received deposit licences - Amret, Sathapana, Hattha Kaksekar, AMK, Credit, Prasac and now Vision Fund, according to Cambodian Microfinance Association Chairman Chea Phalarin.

He said it was important to build customers’ confidence to increase deposits at MFIs, adding they were already on the upswing.

Competition among MFIs was starting to grow, he said.

“The more competition, the more improvements the sector tries. The more competition, the more benefits customers receive,” he said.

Canadia Bank Vice President Dieter Billmeier also said he encourage more MFIs to upgrade their businesses.

“I welcome the decision of the NBC to grant a ‘deposit taking license’ to another MFI,” he wrote.

“They literally ‘teach’ the rural population how to save money for ‘not so good’ times like sickness or funerals or for education fees of sending their children to rural schools.”

Foreign Trade Bank of Cambodia Chief Executive Officer Gui Anvanith wrote that commercial banks and MFIs have different target markets.

“Commercial banks and MFIs are covering essentially different geography and different customer segments,” he said.