Logo of Phnom Penh Post newspaper Phnom Penh Post - High-interest burden a necessity to expand

High-interest burden a necessity to expand

High-interest burden a necessity to expand

A worker hoses down a pen at a pig farm in Battambang province. Microfinance lenders say their interest rates are as competitive as possible given the rates they must pay international lenders.

MFI loans still top source of finance for SMEs.

HUOT Huon, a fisherman and rice farmer from Battambang province, figures he got a good deal when he took a microfinance loan at 36 percent per year in April.

Without the 2.5 million-riel (US$610) loan from Sathapana Limited, he would not have been able to buy seeds, fertiliser and fishing equipment, he says, and the rate was also a marked improvement on his last loan from an unofficial lender at 96 percent per year.

“At that time, my family was in a quite difficult financial situation trying to repay the debt,” he said. “Our revenues from fishing and the rice harvest were just enough to repay the interest.”

The father of nine said it was well within his capabilities to meet repayments at the new rate and said he had no concern over losing his land used as collateral. “It’s obvious that the rate is high, but it’s low if compared to the rate charged by informal lenders,” he said.

“We have a source of revenue from fishing, bringing in about $170 per month, so we are able to repay the debt. Moreover, my 4 hectares of rice paddy yields roughly 12 tonnes, and 1 tonne can be sold at $250.”

Mushroom grower Sam Sarim, 48, also from Battambang province, borrowed $2,000 last November from Hattha Kaksekar Ltd. He said he was concerned at the 30 percent per annum interest rate, but said he had no choice.

“The microfinance loan was indispensable to expand,” he said. “Aside from the microfinance lenders, there are no other sources … of capital.”

Sam Sarim worked with his wife on a business plan before committing to the loan and realised his projected monthly revenues of $380 meant he could repay within six months.

Battambang pig farmer Sam Sam Ath says moving away from microfinance lenders and borrowing from a bank gave some respite from high rates. He turned to ACLEDA Bank, which began life as a microfinance institute and continues to offer small loans as part of its overall portfolio, for $40,000 to expand his pig farm. The loan came at 18 percent interest per year.

“The rate is reasonable, but it would be better if it could be reduced to 12 percent,” he said.

Cambodian Microfinance Association President Hout Ieng Tong said despite the wide variance in rates – between 18 percent and 33.6 percent per year – lenders had no option but to keep interest high.

“The interest rates cannot be slashed further or there will be no profits, because we borrow from foreign investors with high interest rates already — up to 13 percent per annum,” he said.

And though he agreed those rates were higher than in Vietnam and Thailand, he said they were much better than in Laos and the Philippines, where microfinance lenders charge up to 60 percent per year.


  • Government hits back at threats to pull EBA, suspend UN seat

    The spokesman for the ruling Cambodian People’s Party (CPP) has said the government is in no way concerned after the European Parliament gave it three months to reverse what it called the “systematic repression of the political opposition”. Ignoring the ultimatum could mean facing

  • Chinese influx pushing locals, Westerners out of Preah Sihanouk

    Some within the Kingdom’s tourism industry have speculated that the recent influx of Chinese visitors may hinder domestic tourism as the price of accommodations in the coastal city of Sihanoukville continues to rise. Preah Sihanouk province, which has become a hotbed for Chinese investment

  • Sar Kheng: Sokha requested security

    Interior Minister Sar Kheng on Sunday revealed the story behind the transfer of former opposition party leader Kem Sokha from Trapaing Phlong prison in Tbong Khmum province to his house in the capital. Speaking at the ruling Cambodian People’s Party (CPP) headquarters in Prey

  • ‘Dire consequences’ from sanctions, warns AmCham

    American businesspeople in Cambodia have warned that any sanction against the Kingdom would have “dire consequences” that could push Cambodia even further into the arms of China. In a letter to US senators and representatives dated Monday, the American Chamber of Commerce Cambodia (AmCham) said