Subscribe Search

Search form

Logo of Phnom Penh Post newspaper Phnom Penh Post - Microfinanciers slash rates

Microfinanciers slash rates

Microfinanciers slash rates

Micro-lending institutions have been forced to cut their rates to attract customers amid tight competition across the sector

Microfinance lenders have cut interest rates by between 0.2 and 0.5 percent in a bid to attract customers amid an intensely competitive market, the chairman of the Cambodian Microfinance Association (CMA) said Friday.

The cut follows heavy criticism of the Microfinance Institutions (MFIs) in recent months over high rates, which sector representatives claimed were necessary to cover costs.

But Hout Ieng Thong said the rate cut would neither threaten profitability nor expose the sector to bankruptcies, as lenders had streamlined operations in recent months.

"Earlier this year we felt that we could not reduce rates because we had some difficulties in terms of operational costs, but we have improved our operations," he said. "We have also taken some measures to improve risk management."

Hout Ieng Thong said Hattha Kaksekar Limited, of which he is chief executive officer, has reduced rates from around 3 percent per month to 2.5 percent. The lender had disbursed $28 million to 44,000 customers, he said.

Prasac Microfinance Institution reduced rates from 3 percent to 2.7 percent per month, while rates on smaller loans were dropped from 2.2 percent to 1.6 percent, after borrower numbers dropped from 100,000 customer last year to 80,000 as of August, General Manager Sim Senacheert said.

"The effect of the economic downturn on people's incomes and tough competition among MFIs are the main factors for the reduction in interest rates," he said.

"We know it will affect our income, but we are willing to take the risk because we have reduced operating costs from 23 percent in 2003 to just 8 percent this year."

CHC Limited General Manager King Kap Kalyan said the rate cut exposed lenders to financial risks.

"MFIs really should not reduce interest rates at this time because our foreign lenders have increased their rates and non-perfoming loans have increased, but we don't have a choice because of market competition," he said.

CHC reduced its average rates last month from 3 percent to 2.6 percent, he said.

Cambodian Economic Association President Chan Sophal applauded the move, saying Cambodian MFIs already charged too much interest compared with lenders in other countries.

"We know that the interest rates charged by MFIs are too high, and they take a lot of profit as a result, so this initiative will give some of those profits back to customers," he said.


  • Kak Channthy, Cambodian Space Project frontwoman, killed in crash at 38 [Updated]

    Updated 5:05pm, Tuesday, March 20, 2018 Kak Channthy, frontwoman of popular The Cambodian Space Project, was killed Tuesday morning in a traffic accident in Phnom Penh. She was 38. Channthy, the internationally recognised singer-songwriter also known as “Srey Thy”, was reportedly travelling in a tuk-tuk on the city's

  • Australians protest Asean summit visit by PM Hun Sen

    Hundreds of protesters gathered in Sydney’s Hyde Park on Friday to protest against Cambodian strongman Hun Sen, who claimed to have been gifted millions of dollars by the Australian government ahead of a special Asean summit this weekend. An estimated 300 protesters, the majority of

  • One Australian, one Cambodian killed in explosion at military base

    Updated: 5:20pm, Friday 16 March 2018 An Australian tourist and a Cambodian soldier were killed in an explosion on Thursday afternoon at an army base in Cambodia’s Kampong Speu province. The Australian, whom the government initially identified as a technical demining expert in his 40s, and

  • Peeling back layers of prehistory in Battambang

    When the man passed away, he had not yet reached 50. He belonged to a tribe that had settled near the Sangker River in Battambang province, likely cultivating the fields and raising animals. On the side, they hunted for boars, and even turtles, one of which