PM Wants Lower Microfinance Interest Rates

Prime Minister Hun Sen on Monday urged the country’s fledgling microfinance sector to cut interest rates in an effort to help the rural poor.

“The interest rates on rural credit are still high, varying from 20 to 60 percent,” said the premier during the opening speech for an international workshop on the supervision of microfinance programs. He noted that neighboring countries provide small-scale loans to the poor at annual interest rates of 11 to 20 percent.

“I appeal to all microfinance institutions to reduce the interest rates to a level that ensures the safety of the institutions and enlarges the access by the people to credit facilities to generate employment and expand their business.”

According to the National Bank of Cambodia, more than 334,000 families nationwide received rural credit loans totaling $23 million last year. That represents a marked increase from 1995 when 44,000 households borrowed a total of $2 million.

Hun Sen told dozens of representatives in financial sectors from Asian countries that Cam­bodia needs to provide $75 million to $125 million in loans to meet the needs of its rural poor.

“The Rural Development Bank should provide the regulatory mechanism to reduce the interest rates and increase the payback period,” Hun Sen said.

of the  microfinancing institution.

Microfinance is a rural credit scheme in which small amounts of money are loaned to entrepreneurs such as farmers and vendors. More than 70 agencies including NGOs and international organizations operate the services in 18 provinces, according to the Rural Development Bank.

“Cambodia is still a high risk country for financing,” said In Channy, general manager of the Association of Cambodian Local Economic Development Agen­cies, the country’s largest microfinance operator. “Without the government efforts to improve financial risk factors, it [reducing interest rates] would only harm small microfinance institutions. And it would lead to no financial access for the poor.”

 

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