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Microfinance grows on agriculture loans

Microfinance grows on agriculture loans

The microfinance sector saw increased demand for loans particularly from small and medium enterprises and the agricultural sector during the first quarter of the year, according to industry insiders.

Domestic microfinance lending, excluding ACLEDA Bank, totalled US$473.4 million at the end of the first quarter, a 51.4-percent increase from the end of the fourth quarter last year, according to statistics from the Cambodian Microfinance Association obtained yesterday. The number of borrowers climbed 14.4 percent to 988,428.

“We are improving because the economy is as well, especially with the increase of new businesses in the provinces and the strength in agriculture,” said Chea Phalarin, Chairman of the CMA and President of Amret Microfinance.

Chea Phalarin said the country’s microfinance institutions have grown their operations at the grassroots level by offering competitive services and products to customers, such as the attractive interest rate on deposits given by five MFIs recently licenced by the National Bank of Cambodia.

“Our interest rate is higher compared to commercial banks. It’s a better service that helps to bring in more customers,” he said.

Deposits at the licenced MFIs climbed 26.8 percent during the quarter to total $52 million on March 31, the report said, while the number of depositors rose 9 percent to 207,137. The CMA also noted a decrease in the overall non-performing loan (NPL) rate during the period.

Amret’s loans and deposits both rose by 30 percent quarter on quarter, reaching $70.9 million and $19.9 million respectively, while its non-performing-loan rate improved to 0.3 percent, according to its president.

“We attained our loan-growth plan in [the first quarter] of this year, and we expect it will keep growing in [the second quarter],” said Chea Phalarin.

Sim Senacheert, Chief Executive Officer of Prasac MFI, said that his portfolio of loans outstanding rose 11 percent by the end of March, reaching $117.9 million, thanks to a demand bump in business loans and more large loans for small and medium-sized enterprises.

Prasac’s NPL rate fell to 0.9 percent from 1.02 percent quarter on quarter, down from 1.63 percent in Q1 of 2010.

“It improved because the clients have money to back their loans,” Sim Senacheert said. “And most of the lenders were cautious in their lending activities, which reduced clients’ debt loads.”

He said he expected Prasac’s loan portfolio to grow 40 percent to 50 percent in 2011, a figure that CMA Chairman Chea Phalarin cited for the entire MFI industry.

“I think that the whole industry performed very well in the first quarter of 2011, and this good performance will continue for the whole year,” he said.

Hiroshi Suzuki, an economist at the Business Research Institute for Cambodia, said the Prime Minister’s goal of exporting 1 million tonnes of rice by 2015 has had a positive effect on the Kingdom’s agriculture industry.

“It is good for the private sector to follow the government policy,” he said, adding that the demand for financing would continue to be strong at this initial stage of development for Cambodia’s economy.

He said he is optimistic about the growth of Cambodia’s financial sector over the next few years, as loan terms get longer and interest rates drop.

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