The government-owned bank charged with issuing $27 million in emergency loans to rice millers as part of an initiative aimed at propping up the struggling rice industry announced the terms of the credit lines yesterday, and said it would ensure that the funds were used appropriately.
Kao Thach, CEO of the Rural Development Bank (RDB), said the government had already transferred the funds to the bank, which will be disbursed to qualified rice millers so that they can purchase rice paddy from farmers. He said the lending aims at stabilising the market price of paddy rice, which dropped precipitously from $240 per tonne to $192 per tonne over the past month.
According to Thach, millers would be offered loans at 8 percent annual interest on the condition that they purchase rice paddy from farmers for no less than $218 per tonne – a price that ensures farmers make a profit on their crop.
He estimated that the $27 million lending package would be sufficient to cover one-third of the 300,000 tonnes of rice expected to be harvested in the coming weeks.
“This special budget from the government will only be used to supplement the shortage of capital from private lending,” he said. “Capital from private [banks] for the other two-thirds is still needed.”
Thach rapped millers, pointing out that many of them sought funding to increase their machinery and storage facilities rather than ensuring they held sufficient capital to purchase paddy stock.
He added that RDB will take measures to ensure that the loans are not be abused by millers seeking to purchase “motorbikes, cars or land.”
The government’s decision to disburse loans directly through the RDB sidestepped the Cambodian Rice Federation (CRF), the industry body that has lobbied the government since March to provide emergency loans for its members. Thach confirmed that the CRF would play no role in determining who would receive the funding, claiming a faster disbursement mechanism was needed.
CRF president Sok Puthyvuth said yesterday that the group was still seeking to cooperate with the RDB to implement the government’s intervention strategy while warning that it was unwise to not work together.
“We cannot separate like this,” he said. “We need to cooperate with each other, [otherwise] I believe that we will have a higher risk [of failure].”
However, Ros Seilava, undersecretary of state at the Ministry of Economy and Finance, stood firmly behind the RDB’s unilateral role, which he said was “a suitable approach to alert the market that it can operate smoothly again.”