Microfinance Sector Continues Swift Expansion

Lending by the country’s 38 microfinance institutions (MFIs) increased by 44 percent in 2013, with deposits in the sector rising by 60.2 percent, according to the National Bank of Cambodia’s annual report released Sunday.

Loans issued by MFIs totaled $117.3 million in 2013, up from $81.32 million in 2012, according to the NBC report. Deposits in MFIs grew by 60.2 percent to $364 million, while active assets in the sector reached $1.43 billion by the end of 2013, up 48 percent from $962 million in 2012.

“The microfinance sector in Cambodia has continued to grow in both the number of institutions and credit volume,” the report says, adding that the non-performing loan rate in MFIs last year was about 0.7 percent.

Chan Sophal, spokesman for the Cambodian Economic Association, said that growth in the MFI sector was likely driven by an increased use of fertilizer and seeds by farmers, overall expansion of the agriculture sector, and increased availability of loans in rural areas.

Mr. Sophal also said that MFIs are providing more credit to small and medium sized enterprises (SMEs).

“I think [the microfinance sector will continue to grow] because there is still a lot of need for financing in the rural areas and most commercial banks seem to have problems financing SMEs,” he said.

Chan Mach, chief executive officer of Kredit Microfinance Institution, said that the current political tension could be a drag on continued growth in the sector.

“If the government can control the situation properly, this sector will continue to move forward,” he said. “If all political problems are resolved, there will be more loans offered by lenders.”

The NBC report also says that annual inflation was 4.7 percent in 2013 compared to 2.5 percent in 2012, a 47 percent year-on-year increase, which the National Bank attributes to increased consumption of goods around July’s national election, seasonal flooding, and “the short term effect of strengthening of tax collection efficiency.”

The NBC report predicts total economic growth of 7 percent in 2014 and inflation of 3 percent.

(Additional reporting by Colin Meyn)

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