Keat Chhon Urges More Business Planning for Rural Credit

Finance Minister Keat Chhon on Wednesday urged micro-finance institutions to strengthen their business planning and management to provide more sustainable services.

The micro-financing sector is one of the government’s most important tools for promoting economic growth and poverty alleviation in the country’s rural areas, he said in a seminar on micro-financing at the Rural Development Bank.

“To ensure the successes it requires that all staff in micro-finance institutions have enough capability and experience to run the business,” he told nearly 70 participants from government and micro-finance institutions, as well as NGOs that provide small-scale credit to farmers and rural entrepreneurs.

Micro-finance institutions em­erged in Cambodia in the ear­ly 1990s as a grassroots way to help reduce poverty.

Those who obtain micro-fi­nance loans say they are the cheap­est way to obtain monetary assistance because private lend­ers charge high interest rates and expect loans to be repaid in a shorter amount of time than expected from micro-finance institutes.

But micro-finance loans are still not reaching the people who need them the most. According to the Rural Development Bank, 72 local and international NGOs provide micro-finance services in 24 provinces, but reach only

11 percent of rural households, which account for nearly 90 percent of the country’s population.

More than $100 million is needed to assist rural poor to improve their living conditions, finance officials say, but so far only one-third of the needy have benefited from the services available in the country.

Experts have said micro-fi­nance institutions should reduce interest rates in order to enable the poorest of the poor to receive the small-scale loans. But the institutions claim it is impossible to lower interest rates unless operating costs and financial risks are reduced by improved infrastructure and political stability.

Bank Chairman Son Kounthor said rural financial institutions need to focus on developing small and medium enterprises that require of them appropriate business planning and management.

“Small and medium enterprises in rural areas turn farmers and others into businessmen. The capacity to plan businesses be­comes important because business planning makes ideas [into] reality,” he said.

 

 

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