But some micro-lending organisations say bad loans are rising as some borrowers struggle to make repayments on schedule

CAMBODIA’S microfinance institutions (MFIs) boosted lending in the third quarter even as bad loans continued to rise.

Angkor Mikroheranhvatho Kampuchea, or AMK, increased its outstanding loan portfolio by 11.8 percent to US$24.6 million in the third quarter by opening up lending activities in new areas and increasing activity in existing ones, Chief Executive Officer Paul Luchtenburg said. AMK’s nonperforming loans (NPLs) grew 0.2 percentage points over the quarter to 2.4 percent.

Luchtenburg said the increase came as AMK continued to show patience with troubled borrowers.

“Most people are honest and want to pay their debts,” he said. “They just need an opportunity. We are working on piloting some ideas to assist our seriously over-indebted clients so that they can work their way out of debt.”

The alternative was to foreclose on properties or force clients to refinance through other lenders or loan sharks to repay loans, which Luchtenburg said merely exacerbated the cycle of poverty. While AMK recognised that in some situations borrowers may need to sell land to settle debts, he said it was a last resort.

Sim Senacheert, general manager of Prasac, Cambodia’s largest MFI, said new lending during the rice-growing season had pushed the loan portfolio up 9 percent to $57 million at the end of the third quarter, adding that NPLs had stayed flat at 1.75 percent.

Lending at Hattha Kaksekar increased 3.5 percent to $27.8 million, helping bring NPLs down 1 percentage point to 3 percent, said General Director Hout Ieng Tong, who is also Cambodian Microfinance Association (CMA) president.

He said CMA figures for the whole sector would not be available until late this month, but that early figures indicated lending had increased around 3.5 percent. “But the NPL rate may stay constant or slightly increase,” he said.

MFI Sathapana Chairman Bun Mony said NPLs rose 0.8 percentage points to 2.5 percent at the end of September compared with the end of June as tough economic conditions continued to affect the ability of clients to make repayments on time. “However, we expect that NPL rates will remain constant or drop slightly in the fourth quarter,” he said.

The rise in NPLs came even as Sathapana boosted its loan portfolio by around 5 percent over the quarter to $36 million, around the same level as at the end of March.

Chea Phalarin, general manager at Amret, Cambodia’s second-largest MFI, said the bank had been cautious regarding new lending in the light of poor economic conditions. The lender’s outstanding loan portfolio dropped 3.5 percent to $54 million in the third quarter after a 1.2 percent drop in the three months to the end of June.

Largely as a result of the falling loan portfolio, NPLs rose 0.78 percentage points to 3.6 percent in the third quarter, he added.