Acleda Bank President and CEO In Channy spent 10 years in a Thai refugee camp before eventually becoming the leader of the first Cambodia-based bank to become an international institution. Acleda began as a micro-finance NGO in 1993 before becoming a for-profit bank in 2000, but it still provides micro-finance loans as low as $50 to small businesses. Originally studying to become a teacher, In Channy switched to finance because of its ability to rebuild Cambodia. He recently spoke with The Cambodia Daily’s Tim Sturrock and Kay Kimsong.
Q: What challenges do banks face in Cambodia?
A: I see a property value bubble. Housing, land [prices have increased] 10 times in some places, especially along the main roads. I call it a concern rather than a challenge. A concern in that if banks grow a lot in the [real estate] sector, I worry that it will affect the banking sector in the future, because property cannot continue to be a boom like this.
Q: How well does micro-finance work and how do you respond to critics of micro-finance?
A: Maybe they are confused. People understand that micro-finance is for poverty alleviation but in fact it’s not directly like that. Micro-finance is for economic development, and economic development is a powerful tool [for] poverty alleviation. If micro-finance is for poverty alleviation why do they charge a high interest rate?
Q: In what ways are banks used in money laundering and corruption and what does the government need to do to tackle that issue?
A: Corruption is not just in Cambodia. Many other countries in the world have corruption but the thing is we have not taken enough action to eliminate that corruption.
In Cambodia we are aware that the government has worked on the anti-corruption law. We expected it for so many years already. So, it hasn’t happened yet. So, we still expect that the government will do something to quell down on the corruption.
Corruption to me is like the hidden cost. It is a risk to everybody. It is a risk to both individual companies and also to banks. The way Acleda works, we work with customers in all segments—low, medium and high segments—across the country. And the burden is on the customer.
When they want to have land titles, land certification, it’s hard for them, especially those small customers, micro customers. They want a loan of $500 and then if you say they should have the land title, but the land titles will cost them up to $1,000 [because of corruption] then what can you do? It’s very difficult for them. At Acleda we try to accept the land receipt not necessarily the land title.
Q: Are interest rates in Cambodia too high?
A: Compared with five years, even compared to 2004, three years ago, interest rates are low—much lower.
Now, let me start with commercial rates in 2005 and 2006, you could not obtain a loan with an interest rate of 10 percent per annum, but in 2007 and now, a customer can still can obtain a loan from a commercial bank and draw between 8 and 18 percent per annum.
At Acleda Bank we still charge between 13 and 18 percent for commercial loans. And then small business, we charge 15 and 24 per annum. And micro-finance, Acleda charges 24 and 28 per annum. So look back and compared with 2004 the highest interest rate for micro-business was 40 percent.