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Loans trickle out to rice millers

A rice farmer in Tuol Tamim village in Battambang province sifts through freshly harvested rice paddy in January 2015.
A rice farmer in Tuol Tamim village in Battambang province sifts through freshly harvested rice paddy in January 2015. Heng Chivoan

Loans trickle out to rice millers

Three weeks since Prime Minister Hun Sen approved $27 million in emergency loans to prop up the struggling rice sector, the state-owned bank charged with disbursing the funds said yesterday that it has only granted $1 million in loans, claiming that the number of eligible applications has been lower than expected as millers have failed to meet the necessary collateral requirements.

Kao Thach, CEO of the Rural Development Bank (RDB), said that only two loans have been approved for rice millers in Pursat and Battambang province so far, while he expected the number of eligible loan applications to pick up as the harvest season goes into full swing.

“So far, we have approved one loan for around $800,000 and another for around $200,000,” he said, adding that the millers applying for loans have been “a bit slow”.

“Maybe [the loans] are not yet necessary because millers still have capital to purchase paddy stock,” he suggested.

He added, however, that due to the requirement that millers must place a certain amount of rice paddy down as collateral, and have a fire insurance policy, the process for issuing lines of credit was “complicated”.

“It does not take a long time to actually receive the loan package, however, after we inspected some applications and our team went to inspect the amount of stock, we found millers were relying on purchase orders rather than what they actually had,” Thach explained.

Due to this discrepancy, he said that numerous loans have been postponed until they have sufficient stock to cover the collateral, or cancelled. Nevertheless, he stressed that all loans would need to be repaid to the government by May of next year as the capital is needed for the national budget.

“These are short-term loans that need to be repaid,” he said, confirming that the loans come with a low 7 percent interest rate.

Sok Puthyvuth, president of the Cambodia Rice Federation (CRF), said that it was still an imperative that the government speeds up the lending process to ensure that both millers and farmers have reliable capital to keep up with supply.

He said the CRF will hold meetings with the RDB and the Ministry of Economy and Finance this week in hopes of lobbying the government to nix its paddy stock requirements, as the sector still desperately needs quick access to capital.

“We will have discussions to speed up lending,” Puthyvuth said. “It is not necessary [for millers] to have paddy rice in stock before getting the loan, but we do need to insure that the loans are used properly and will help rice farmers.”

Phuor Sokleang, marketing manager for Phour Kokky rice miller in Pursat province, said her company was one of the few to receive an emergency loan from the RDB. She said the bank approved the loan application in just one week, disbursing $680,000 against 3,500 tonnes of paddy rice as collateral.

“I am happy to get the loan package and it takes just a short time compared to commercial banks,” she said.

With the loan from the RDB, she believes that her company will be able to export 50,000 tonnes of rice this year, compared to only 20,000 tonnes last year.

“The most important thing is having [sufficient] stock of paddy rice in order to get the loans,” Sokleang said, acknowledging that smaller rice millers could find this limits their access to credit.

“Many small rice millers are in trouble and if the RDB could ease up their criteria, it would help them solve their problem of purchasing paddy stock,” she said.

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