MFI loans rose across the board in Q1, but profits slumped as institutions slashed interest rates

LENDING by microfinance institutions showed signs of growth in the first quarter of the year, with non-performing loan rates remaining mostly steady, industry officials say.

However, companies saw net profits decline quarterly because of a decline in interest rates and the cost of operational expansion, said Hout Ieng Tong, president of the Cambodian Microfinance Association (CMA) and general director of microfinance firm Hattha Kaksekar Ltd.

“We saw small business activities gradually improving in the first quarter. People are starting to need loans for their businesses,” he said.

Hattha Kaksekar’s lending was US$33 million in the first quarter, up 7 percent from the previous quarter. The company’s non-performing loan (NPL) rate remained at 3 percent quarter on quarter.

In 2009, outstanding loans at the Kingdom’s 22 microfinance institutions (MFIs) rose 10.8 percent, to $485.1 million, compared to 2008. The overall NPL rate for 2009 was 2.86 percent, or $8.5 million, a jump from 0.67 percent recorded the previous year.

“This year, it’s expected we’ll see better lending as the economy begins to recover, but we do not expect the NPL rate to drop much,” Hout Ieng Tong predicted.

Lending is also on the up at other leading Cambodian companies, many of which have seen profits fall this quarter.

Samic Microfinance Ltd reported a quarterly rise of 9 percent, to $6 million, in lending at the end of March.

“We think that the economic situation is not better yet, and people’s earnings from their jobs and businesses are not good. Few new businesses have begun or applied for loans,” warned Samic General Manager King Kap Kalyan.

Samic saw its NPL rate drop just 7 points to 4.82 percent, for a total $270,892 in the first quarter of the year, but its profit margin fell nearly 40 percent quarter on quarter.

“We hope that it will become better in the second quarter of this year,” King Kap Kalyan added.

Sathapana Ltd saw lending grow 2.9 percent quarterly to $42.59 million. Net profits at the company fell by 2.5 percent, to $345,000. Its NPL rate dropped 6 points, to 1.97 percent.

“Despite the slight drop in the NPL rate, which showed a slight improvement in the economy, it can be interpreted as clients having made better incomes,” Chairman Bun Mony said.

Prasac MFI Ltd saw outstanding loans increase by 3 percent quarter-on-quarter, to $66 million.

“Portfolio growth during the first quarter is usually slow, because the first quarter is the peak repayment period for agriculture loans,” Prasac General Manager Sim Senacheert said.

Prasac’s quarterly NPL rate showed signs of improvement, dropping 3 points to 1.63 percent.

“After tightening our lending process in 2009, new loan disbursements have had no problems. Almost all of the problem loans were loans that were disbursed before 2009,” Sim Senacheert said.

Prasac’s before-tax profit fell 27 percent in the first quarter, to $633,000, due to a decrease in the interest rate last year.

Representatives of Thanea-kea Phum (Cambodia) Ltd declined to discuss the company’s first quarter figures, but said that it was slowing operations and lending.

CEO Chuon Sophal said: “We are managing loan problems.”

The company lent out $17.3 million in 2009, when it had an NPL rate of 4.9 percent, or $853,083, according to a CMA report.