Cambodia's 25th microfinance institution has opened its doors, becoming the latest entrant to what many say is an increasingly crowded sector. But financiers have welcomed the launch of South Korea’s Prime MF Microfinance, saying it provides another opportunity to extend credit to the Kingdom’s smaller borrowers.
Prime's Chief Executive Officer and director Kim Seoung-su said US$500,000 has been invested to start up the venture, adding that the company looked to offer $3.5 million in loans in its first year at low interest rates.
“We have many competitors, but I don’t think the industry is very competitive – though we still have some challenges,” he said at the company launch in Phnom Penh’s Tomnob Tek commune, Chamkarmon district, on Friday.
“I have two main plans – first to target middle [class] and poor people, and second we will enlarge our credit service," he said.
The MFI intends to offer loans to groups of people, some without collateral, providing that fellow group members act as guarantors.
Although there is a high number of MFIs in the Kingdom, there are fewer than in neighbouring Vietnam and Thailand, he claimed.
Kim Seoung-su added hopes that Prime would be able to grow in line with the Kingdom’s economy.
“I hope we have more opportunities to grow within the next few years in Cambodia, especially if your economy keeps improving.”
Officials have welcomed the move. “I believe Prime will try its best to offer more products and services to more and more people, especially rural people,” said Kim Vada, deputy director general of the National Bank of Cambodia.
While Chea Phalarin, chairman of the Cambodia Microfinance Association, also welcomed the latest market entrant.
“We welcome more and more investors into the market, as loan demand is very high,” he said.
According to Sim Senacheert, general manager of the Kingdom’s largest micro-lender Prasac, although there may be too many MFIs in Cambodia, many are smaller operators that are not particularly competitive.
“Only about nine MFIs have a portfolio greater than $10 million,” he said. “Indeed, many MFIs are not a concern for us as they are small, and largely operate in the city.”
Prime is the second Korean-owned MFI to set up in the Kingdom, following Angkor ACE Star Credits Limited’s launch last year.
Prime plans to open more branches in Phnom Penh berfore spreading to the provinces, including branches in Kampong Thom, Battambang, Sihanoukville, and Kampong Speu.
Micro-lending from the Kingdom’s MFIs and ACLEDA Bank’s small loans increased more than 33 percent in 2010 to $647 million, from a total of $485 million in 2009.
The Non-Performing Loan rate declined from 2.86 percent in 2009 to 1.29 percent last year, figures from the Cambodia Microfinance Association show.