STATE-RUN Rural Development Bank (RDB) said Tuesday it was planning a US$10 million fund in cooperation with Vietnam’s Bank for Investment and Development of Cambodia (BIDC) to make loans to domestic rice millers to help them boost production.
Both parties would invest $5 million in the fund, which would make loans repayable over three to five years on commercial rates, RDB Director Sun Kunthor said.
“We already agreed with each other on creating the fund to support local investors in the rice sector and give them access to financing to improve their milling equipment,” he said. “However, we have not reached an agreement yet; we are still in preparation.”
He acknowledged that the fund would be relatively small, given the size of the rice sector in Cambodia, but said it would support a range of other financing initiatives being fronted by the RDB.
In November, the Ministry of Economy and Finance made $18 million available to rice millers through a fund administered by the RDB. Loans were to be extended at a preferential interest rate of just 7 percent a year, well below market rates in the banking sector.
A consortium of banks also offered the RDB a $23 million syndicated loan last month at a below-market rate of 10 percent to be redistributed to the rice sector. The BIDC put $18 million towards the loan, Canadia Bank $3 million and the Foreign Trade Bank the remainder.
Sun Kunthor said $5 million of the loan was to go to rice millers for medium-term investments, $12 million was to be extended to associations to buy paddy and $1 million to farmers to buy agricultural imports.
“Our priority for financing is for associations to buy paddy to process it for export to foreign markets due to high demand there,” he said, identifying India and the Philippines as two countries likely to require imports of the staple foodstuff this year.
“We need to take this opportunity to export more of our rice yield to the world,” Sun Kunthor said.
According to reports from the Ministry of Agriculture, Forestry and Fisheries, Cambodia’s paddy production exceeded local demand last year by about 3.16 million tonnes.
The RDB predicted its loans would help millers purchase an additional 150,000 to 200,000 tonnes of paddy during the harvest season, assuming paddy prices at between $200 and $210 per tonne.