MFI Sector up 51 Percent in 9 Months

Cambodia’s microfinance sector continued to experience rapid growth as loan disbursements reached $1.79 billion over the first three quarters of 2014, a year-on-year increase of 51 percent.

The data, compiled by the Cambodia Microfinance Association, covers loans issued by 45 microfinance institutions (MFIs), not including Acleda Bank. Last year, 39 institutions handed out $1.18 billion in loans over the same period.

The recent growth was the reflection of a healthy, growing economy in which clients are looking to make bigger business investments and purchases, said Chan Mach, CEO of the Kredit microfinance institution.

“There are many existing clients who, when they’ve finished paying off their loan, will get another, even bigger loan because they become more confident to borrow,” he said. “There is also more diverse lending, for example to small and medium sized businesses.”

Mr. Mach said the proliferation of available credit has also resulted in customers taking out multiple loans, estimating that roughly 30 percent of the people who apply for credit with his firm have 2 loans already, ruling them out for a third with Kredit.

“If they have two loans and are having repayment problems then they go and get another loan to cover their outstanding loans,” he said.

In a 2013 report by the Cambodia Institute of Development Study that analyzed the level of indebtedness in the MFI sector, 51 percent of borrowers surveyed said they had struggled to repay their loans on time.

“The most common sacrifice or coping strategy used by microfinance borrowers was to reduce the quality of food (48 percent) or the quantity of food (44 percent),” the report says.

But independent economist Srey Chanthy said the risks facing the country’s microlenders were low, at least for the time being.

“At the moment the risk is low…because the economy is growing well,” he said.,

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