The National Bank of Cambodia (NBC) has encouraged financial institutions to add new products and services to contribute to the development of the agricultural sector.

Its deputy governor Neav Chanthana who said this was speaking at the 6th NBC Annual Macroeconomic Conference on the theme Agriculture Sector in a Rapid Structural Transformation and Uncertain Global Trade Environment which was held on Monday at its headquarters in the capital.

She said over the last few years, agriculture in Cambodia had not showed remarkable growth. The sector used to grow at 6.2 per cent between 2004-2008 but fell to as low as one per cent in the 2014-2018 period. She said the financial sector’s involvement was very important in agriculture.

“I believe the financial sector can continue to support the growth of the agricultural sector, so I encourage all banks and microfinance institutions to create new financial products and services using modern financial technology to improve the business and families in the agricultural sector.

In 2010, total credit given by the financial institutions to the agricultural sector was $381 million. This increased to $3.2 billion by August this year.

Cambodian Rice Federation (CRF) vice-president Chan Sokheang said Cambodia’s agricultural sector was facing a shortage of working capital and high production costs, which made it impossible for domestic products to compete with those from other countries.

Presently, he said, the agricultural sector contributed about 25-30 per cent to the country’s gross domestic product while it only receives about 10 per cent of loans from the financial sector.

“I call on all the financial institutions to reduce interest rates and find other solutions that allow farmers and other stakeholders in the sector to access funding for their working capital,” he said.

If financial institutions can accept collateral apart from the traditional land and mills, this could be a new solution to support Cambodia’s agricultural sector, Sokheang said.

He said despite the non-performing loans in the agricultural sector being only three to five per cent, financial institutions still considered it highly risky to give credit to the sector.

“To achieve the goal of exporting one million tonnes of rice, we need an additional $200 million in working capital,” he said.

Ministry of Agriculture, Forestry and Fisheries secretary-general Khy Kosal said financial institutions invest less in agriculture because there are still many challenges related to irrigation.

He said with Cambodia’s agricultural sector, the water system is important so there is a need to have higher investments.

“If in the future the government, through the Ministry of Economy and Finance, considers adjusting public investment and broadens it to water resources, farmers will get greater access to finance,” he said.

At the same time, Kosal also suggested that all farmers and investors should study market demands and comply with it.

He said Cambodia produces a total of about 30 million tonnes of agricultural products annually, of which about 10 million tonnes is rice.