Logo of Phnom Penh Post newspaper Phnom Penh Post - Lenders see rise in bad microloans

Lenders see rise in bad microloans

Lenders see rise in bad microloans

090330_15.jpg
090330_15.jpg

Cambodian microfinance institutions say economic crisis is taking its toll on the MFI sector and increasing the number of nonperforming loans to more than 1 percent

Photo by:

Tracey Shelton

Microfinance lenders say the economic crisis is leading to higher rates of nonperforming loans in 2009. Last year, bad loans were just 0.67 percent of total lending.

MICROLENDERS predict nonperforming loans (NPLs) will grow from 0.67 percent last year to more than 1 percent in 2009 as more borrowers struggle to pay their debts in an economic slowdown.

Even with the slowdown, some lenders say their total loans will increase in 2009 as demand for banking services grows.

That could lead to more asset seizures as lenders try to recuperate unpaid loans.

"Our major concern now is that nonperforming loans will go up," said Bun Mony, a member of the board of the Cambodian Microfinance Association (CMA) and chairman of Sathapana Limited. "We forecast that NPLs will increase to 1 percent or higher this year due to the economic downturn that is affecting our clients' incomes."

He said that his microfinance institution (MFI) Sathapana lent US$37.5 million last year to 37,000 clients and plans to increase that to $44.5 million this year to meet growing demand.

"The NPL rate at my MFI has increased twice since the start of this year, up from an NPL rate of 0.16 percent at the same time last year," he said.

"We project that bad loans at our microfinancer are around 1 percent this year."

More defaults

Chea Phallarin, general manager of microfinancer Amret, said Thursday that NPLs at his institution have increased over the last few months.

"Last year, NPLs were only 0.06 percent out of the $54 million in total lending - but since the start of the year, the NPL rate has increased sharply to around 1 percent," said Chea Phallarin. "For the whole year, it is forecast at 1.2 percent."        

He blamed the troubles on the economic slowdown and the lack of a credit bureau, which allows some clients to obtain loans by misstating their finances.

Sim Senacheat, general manager of Prasac, with 97,000 clients, said Thursday that the NPL rate at Prasac during the first quarter of 2009 had risen to 0.5 percent, up from 0.28 percent last year.

"Bad loans are still controllable and we hope that they will stablise this year," he told the Post.    

He said last year Prasac lent $60 million and plans to increase the figure to $75 million in 2009.

Bun Mony said microfinancers usually lend up to 50 percent of appraised collateral and said that bad loans will lead to more asset seizures.

Chea Phallarin said seizures of land and other assets only takes place after permission from the courts.

"Some of our clients have the ability to repay their debts, but they refuse to do so; we will sue them in court to seize collateral to clear debts."

"We only take clients to court if they fail to pay for between three and six months. This is a last resort," he said.

Sim Senacheat agreed that his institution has seized collateral such as land or houses to repay debts, but that it only does so through the court system.

"We do this when clients fail to pay and have defaulted for at least half a year."

MOST VIEWED

  • Ethnic group ‘disappointed’ to be denied French visas to attend court

    Eleven people at the centre of a case involving seven indigenous Bunong villages in Mondulkiri province pursuing legal action in France have expressed disappointment after the French embassy in Phnom Penh denied their visa applications to attend court. A press release said the 11 included a

  • Cambodia nabs 12th place in best retirement destinations

    Cambodia is an expatriate hotspot for those dreaming of living a more luxurious lifestyle at an affordable cost, according to International Living’s Annual Global Retirement Index 2019. For the fourth year in a row, Cambodia took the top spot in the Cost of Living category.

  • EU starts EBA withdrawal

    The EU on Monday announced that it has begun the 18-month process of withdrawing the Kingdom’s access to its preferential Everything But Arms (EBA) agreement over “a deterioration of democracy [and] respect for human rights”. However, the Garment Manufacturers Association of Cambodia (GMAC) said

  • PM: War result of foreign meddling

    Prime Minister Hun Sen said on Sunday that Cambodia’s recent history of conflict was caused by foreign interference. “The wars that happened were caused by provocation, incitement, support, smearing and interference from foreign powers, and the group of ignorant people who pushed Cambodia to