Finance Minister Keat Chhon on Friday encouraged commercial banks, particularly Acleda Bank PLC, to lower interest rates on loans to Cambodia’s poor from the current monthly rate of around 3 percent.
Speaking to reporters after the inauguration of Acleda’s new $6 million headquarters in Phnom Penh, Keat Chhon applauded the reduction of micro-credit interest rates from 6 percent monthly in the 1990s to the current level of 2.5 to 3 percent, but said that it was not enough.
“The current interest rate is not good enough for poor borrowers,” he said.
Keat Chhon cited Acleda as being a model for Cambodian banks because of the speed with which the bank has grown from a micro-credit NGO in 1993 to arguably the largest bank in Cambodia today. He encouraged Acleda to now serve as the model for other banks by lowering interest rates.
Despite championing the rate cut, Keat Chhon stressed that the government would let the free market determine lending rates.
Acleda President and CEO In Channy said his bank is planning on lowering its monthly micro-credit lending rates to 2 percent by 2009.
“We established this bank to serve the needs of the borrower-even if it’s as small as $20,” he said. “If we set our rates higher, we won’t have any clients.”
He said that rates at his bank depend on the size of the loan and the risk of the loan, but the maximum rate for any loan is 3 percent.
National Bank of Cambodia Governor Chea Chanto said that improved economic performance meant that the risk to lenders was lessening by the year, making it a prime time to lower rates.
“The market is the one that will make the determination,” he stressed. “We will not force [banks] to lower interest rates.”
