40 Billion Riel Released for LPCO

KHMER TIMES
SOK CHAN



The National Bank of Cambodia (NBC) has released some 40 billion riel (about $10 million) to microfinance institutions (MFIs) and commercial banks at three percent interest as part of the first bidding of the new Liquidity-Provided Collateralized Operation (LPCO).

According to a statement released by the NBC yesterday, the money was released to an undisclosed number of MFIs and commercial banks who bid, with the largest bid being about eight billion riel (about $2 million) and the smallest about 200 million riel (about $50,000).

The LPCO will initially last for three months, and will be extended based on how effective it proves to be. The program will be insured by putting non-convertible debentures up as collateral, in either riel or US dollars.

The operation is intended to boost the liquidity of riel in Cambodia.

NBC director-general Chea Serey recently explained that the LPCO was intended to establish a benchmark rate from which to promote the use of riel in transactions and hopefully contribute to lowering the current high interest rates.

“Through this instrument, [the NBC] hopes that it will influence the interest rate in the market since the NBC will issue riel to MFIs and commercial banks for their lending operations [and]...if it is successful, it will add convenience to managing the Cambodian banking sector,” Ms. Chea Serey said.

So Phonnary, executive vice president of Acleda Bank, told Khmer Times that the LPCO will encourage MFIs and other financial institutions to use more local riel currency, but she noted that Acleda had not participated in the bidding as it already held enough riel for transactions and lending.

“As I said, we have enough riel since we have over 270,000 accounts which are mostly from the government's payroll, so we have enough riel to do transactions,” she said.

Sok Voeun, chief executive officer of LOLC Microfinance, also did not bid in the first round, as they in fact had a surplus of riel, but he said that they would likely be attending the next round in three months.

“For the past six months, we have had a surplus of riel in our institution since the drought hit the agriculture sector which meant that customers did not apply for loans. But we will prepare to join with the NBC in the second bidding stage,” Mr. Voeun said.