The Ministry of Agriculture, Forestry and Fisheries has called on microfinance institutions (MFIs) to assess investment feasibility for the agriculture sector through low-interest lending, thus promoting financing in the production chain. This comes as MFIs emphasise the need for enhanced support for agricultural credit.

During his recent meeting with the Cambodia Microfinance Association (CMA) leadership, agriculture minister Dith Tina underscored the importance of MFIs in supporting farmers and spurring the growth of the country’s agricultural sector, which he said is vital to fortify the national economy.

He said that under the seventh mandate, the ministry has rolled out a new agricultural community policy, complete with ample resources, capital, management plans and targeted markets.

“MFIs can examine investment opportunities through low-interest loans, facilitating expenditures in the production chain and providing benefits to both institutions and farmers,” he was cited as saying at the October 20 meeting.

Both parties pledged to strengthen their collaboration by sharing agricultural and market data, fostering agricultural insurance and disseminating relevant information to farmers.

CMA spokesperson Kaing Tongngy said on October 24 that agriculture remains a core sector that MFIs consistently prioritise, noting that loans dedicated to this sector make up roughly 18% of the total. He said the other top two categories were household and retail business loans, respectively.

He added that the CMA presented a progress report at the meeting, to detail prior support from MFIs and solicit additional backing from the ministry for initiatives that align with the government’s efforts to develop the agricultural sector.

“We continue to push for agricultural credit since it’s not just a strategic and priority sector for Cambodia but also instrumental in bolstering the local economy, augmenting people’s earnings and curtailing rural impoverishment,” he said.

However, Tongngy cautioned that in normal context, agricultural loans inherently carry higher risks compared to other sectors, particularly when misused. He explained that MFIs always conduct comprehensive evaluations to ensure feasibility before sanctioning any loan.

Data from the National Bank of Cambodia (NBC) shows that by the first half of 2023, MFIs had granted loans amounting to $9.7 billion, marking a growth of 14.8%. This is slightly lower than the same period’s growth in the previous year, which stood at 16.2%.

The sectors witnessing the most rapid expansion included manufacturing at 30.8%, households at 18.4%, trade and commerce at 15%, construction at 14%, with agriculture trailing at 13.2%, according to the central bank.