CHEA VANNAK
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| Kao Thach, president of the Rural Development Bank. China-Asean Law Institute Opening KT/Chor Sokunthea |
In a bid to stabilize falling prices, the Cambodian government in late September gave the green light to the Rural Development Bank (RDB) to disburse loans totaling $27 million to millers to buy paddy rice from farmers at 840 riel ($0.21) per kilogram.
Khmer Times’ Chea Vannak spoke with Kao Thach, RDB’s president, on the bank’s efforts to revive the country’s beleaguered rice sector.
KT: Can you tell us the progress of the disbursement of the government’s special loan to the rice sector?
Mr. Thach: The RDB has disbursed about $1.5 million, since the government approved $20 million to be given out as special loans to rice millers – with another $7 million coming from the RDB. The loans have been made out to a few rice millers in Battambang and Pursat provinces. Only five rice millers applied for the loans. Two of them, however, withdrew their applications.
KT: What is the reason for the poor response from rice millers?
Mr. Thach: In RDB’s loan policy, rice millers have to buy paddy rice from farmers at the price set by the bank. But many of the millers refuse to adhere to that policy and want to purchase farmer’s paddy rice at a lower price. That defeats the whole purpose of the special loans. Rice millers were supposed to pass on the benefits to farmers, and not the other way around. The loans were also meant to help farmers from being shortchanged by middlemen.
Also, rice millers are wary of storing large quantities of paddy rice in the warehouses due to fluctuations in the international commodity markets.
It’s due to these reasons that the number of loan applications have been low.
KT: Does the RDB have plans to reduce the interest rate of the special loan?
Mr. Thach: I think a seven percent interest rate is reasonable within the context of current interest rates offered by banks, especially for the agriculture sector. The RDB interest rate is on par with business loans.
The current interest rates set by commercial banks and microfinance institutions for loans in the agriculture sector range from 10 to 24 percent, due to the risk factor. So, RDB’s interest rate is still reasonable.
KT: The government has also approved $15 million in loans, to be disbursed by RDB, to rice millers for the building of warehouses and rice silos. What is the difference between this new loan and the special loan?
Mr. Thach: The $15 million has just been approved by the government and the disbursement has not been made yet by the RDB. The $20 million special loan is a short-term intervention that is supposed to provide working capital for rice millers during this year’s harvest period, and is repayable next May.
The new $15 million loan is more long term. It focuses on helping rice millers build warehouses and silos with good storage facilities, so that the quality of rice does not fall if it is kept for a long time.
KT: The current price of rice is low on the commodity markets. Does RDB have a plan to help rice farmers during this period?
Mr. Thach: What we can do to help rice farmers is to provide them with loans to improve their cultivation methods and use better quality seeds. During this period when rice prices are low, RDB encourages farmers to go into contract farming. Contract farming may be considered as an effective risk management system for small farmers, enhancing their accessibility to farm inputs and ensuring more stable prices for their harvests.
So, RDB will work with farmers to help them understand the advantages of contract farming. We will also, at the same time, work with rice millers to help them buy paddy rice from contract farmers. In those areas where contract rice farming is practiced, RDB will offer loans to farmers. They don’t have to seek high-interest loans from commercial banks or microfinance institutions.
KT: Besides the rice sector, what other sectors does the RDB deal with?
Mr. Thach: RDB also focuses on the pepper, cassava, rubber and animal husbandry sectors. We consider Kampot pepper as a strategic crop due to its geographic indication status given by the European Union. RDB loans will therefore improve the livelihoods of farmers growing Kampot pepper.
RDB is also encouraging farmers to diversify into animal husbandry – so that they will have an income through the year, rather than just depending on seasonal harvests of crops.
The rice sector is still important for RDB. Close to 60 percent of our loans go to the sector.
KT: What is your outlook for 2017?
Mr. Thach: The RDB is a state-run institution and so we work according to government policy. We are working to support the government’s aim to export one million tons of rice a year.
Next year, we plan to change our name from the Rural Development Bank to the Agriculture Bank. We hope to better serve our clients by offering them other services, currently only available in private banks.
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