MFIs Watch Rice Loans

KHMER TIMES
MAY KUNMAKARA

Rice farmers could have their loan repayments waivered until they are able to receive reasonable prices from millers for their crop. KT/Chor Sokunthea

The country’s financial institutions are closely monitoring loans that have been made to rice farmers, who say that this year’s fall in rice prices will affect their ability to make repayments, industry officials said yesterday.

Last year, farmers were paid around 840 riel ($0.21) per kilogram of unmilled rice. This year, farmers across the country have said that they are being offered closer to 600 riel. The situation led to a protest in Battambang province on Sunday. The next day, the Rural Development Bank (RDB) announced that rice millers in the country will now be able to access the government’s promised emergency loan of $20 million to purchase rice from farmers at 840 riel in a bid to prevent prices falling further.

The price drop has been blamed on a lack of cash flow and storage capacity by the country’s millers, and cheap imports from neighboring countries.

Hout Ieng Tong, president of the Cambodia Microfinance Association (CMA) told Khmer Times yesterday that he had not received reports of anyone defaulting on their loans, but that microfinance institutions (MFIs) were monitoring things very closely.

“On behalf of the association, we have already told our members that we have to help farmers, who have been affected, on a case-by-case basis.”

“We also had a meeting with the National Bank of Cambodia and we are committed to help farmers who face difficulties,” he added.

He stated that any farmers affected will have their repayments waivered by CMA member institutions, until they are able to receive reasonable prices. He did not specify how long this might last.

According to Mr. Ieng Tong, MFIs currently have nearly $3 billion in outstanding loans, about 35 percent of which comes from the agricultural sector.

Sim Senacheert, president of Prasac Microfinance, confirmed that so far, no farmer has sought assistance with repayments.

“We haven’t see any of our customers with problems from the issue of declining rice prices so far.”

He said this was possibly due to most of Prasac’s farming customers diversifying their crops, and not relying solely on rice for their income.
Bun Mony, CEO of the newly established Sathapana Commercial Bank, said that of the $400 million in outstanding loans held by his bank, about 30 percent was to the agricultural sector.

Of the 30 percent, he said, only a small fraction of loans were given to rice farmers. He stated that none had yet sought help with their repayments.

On Monday, the National Bank of Cambodia and the Ministry of Economy and Finance released a joint statement calling for financial institutions to take action to assist farmers. The joint statement also instructed financial institutions to earmark funds to be made out as loans to rice millers.

Mr. Ieng Tong said that the government’s focus on helping farmers was important, but he added the joint statement at this time “was a bit too premature.”

Prime Minister Hun Sen on Tuesday called on all civil servants and private companies to help purchase rice from farmers across the country.

“After the RDB announcement, I observed that there were many government officials and traders and some companies purchasing rice from farmers. This contribution is important to help farmers,” said Mr. Hun Sen.