Major financial institutions show more trust in providing loans to the agricultural sector, evidenced by increasing agricultural loan disbursement, thanks to potential growth in the sector and better preparation of financial report among borrowers, according to industry insiders.
Acleda Bank, Cambodia’s largest domestically owned bank, has been increasing its percentage share of its loan portfolio into agriculture from 15 per cent two years ago to 19 per cent at the end of March.
While the bank’s total loan portfolio reached about $1.35 billion at the end of March this year, In Channy, the bank’s president and chief executive said $254 million was given to agricultural loans, which represents about 19 per cent of total lending.
“It [agricultural loans] is growing quite well,” said In Channy, “We are more confident to provide loans in the agricultural sector, thanks to better preparation of the financial reports of borrowers and the country’s agricultural development potential.” He added that another $16 million went to rice millers, but are considered separate from agricultural loans.
Acleda’s performance is not alone, and the trend is common in other financial institutions.
Bun Mony, president of Cambodian Microfinance Association, told the Post that while the total loan portfolio in Cambodian MFI industry reached about $1 billion at the end of March this year, he estimate that at least 30 per cent went to agriculture.
On behalf of suppliers, flexibility to the market trends is needed to stay competitive in the market, he said.
“With the export of agricultural products, for instance, milled rice is on the rise,” Bun Mony told the Post, “The country’s advantage in the sector is still a source of growth in the coming years.”
Experts have long said the shortage of loan activity in Cambodian agriculture hindered the sector’s development. The capital needed for inputs such as seeds and fertiliser, and the capital to purchase paddy rice to process have been mentioned so far.
Kim Savuth, the president of the Federation of Cambodian Rice Exporters agreed that accessing loans from banks and MFIs is easier compared to some previous years.
Nevertheless, he said farmers still suffer because of higher interest rates offered by micro lenders, while strict requirements from banks were still a barrier for rice millers.
“If banks could access loans by just reviewing business plans and reduce the dependency on collateral, it would be [of] much help to increase production capacity,” said Kim Savuth.