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MFIs propelling economic growth in rural Cambodia

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MFI operations currently reach about 90 per cent of the Kingdom’s villages, Cambodia Microfinance Association (CMA) chairman Kea Borann said on Monday. Hong Menea

MFIs propelling economic growth in rural Cambodia

The microfinance sector has contributed significantly to rural economic growth, even as industry insiders call for more efficient lending, said Cambodia Microfinance Association chairman Kea Borann on Monday.

Speaking at a workshop on Rural Economic Development through the Microfinance Sector, Borann said with more than $6.5 billion in loans issued by microfinance institutions (MFIs) as of the first half of this year, the sector is actively contributing to the Kingdom’s rural development process.

MFI operations currently reach about 90 per cent of the Kingdom’s villages, he said. This year, credit provision to rural clients could grow by about 25 per cent.

“With this progress, the Cambodian heavily-indebted rate has also slowed,” he said.

However, he said progress in the microfinance sector could also put the Kingdom in a credit crunch through irresponsible consumer credit lending.

Borann cited Bosnia and Nigeria as countries with over-booming microfinance sectors which have experienced credit crises.

“Our association works hard to help disseminate and provide information to avoid all risks in Cambodia,” he said.

As of the end of June, Borann said, the microfinance sector’s non-performing loan ratio stood at only 1.2 to 1.3 per cent. Most bad loans are caused by unforeseen circumstances, such as natural factors and changes in a family’s economic circumstances.

Heng Bomakara, the deputy director-general of the National Bank of Cambodia’s (NBC’s) General Directorate of Supervision, said Cambodia’s microfinance sector is growing and deposits and loans are increasing.

The growth is a testament to public strength and confidence, he said. The authorities and MFIs are working together to develop new protection policies to support the people.

“The contribution of the microfinance sector is very important in improving livelihoods. It actively promotes financial inclusivity in Cambodia, which is a great step to encouraging rural economic development,” said Bomakara.

As of July, there were 82 MFIs in Cambodia, of which seven are microfinance deposit-taking institutions (MDIs).

NBC’s 2019 half-year financial report showed annual interest rates at MFIs in Cambodian riel and dollars stand at 17.7 per cent and 16.95 per cent.

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