Ren Ruon, 40, a villager in Kampong Cham province, uses a microloan to finance her small business selling fruit to factory workers. However, she admits she loses sleep sometimes thinking about the land that she could lose as collateral if she ever defaults on repayment. TAN HUI LEE/THE STRAITS TIMES
The rate of microfinance loans with overdue payments dropped noticeably with the nonperforming loans ratio at one per cent at the end of last year, according to the National Bank of Cambodia (NBC) annual report.
The nonperforming loans (NPL) ratio – loans where payments are more than 30 days overdue – was at two per cent at the end of 2017.
Sok Voeun, the CEO of microfinance institution LOLC (Cambodia) Plc, said on Monday that an NPL at nearly one per cent shows healthy growth in the industry and a recovering trend after the sector experienced a notable jump in the NPL rate in 2017.
Main crops at ‘good’ price
Voeun, whose lending institution gave out $487 million at the end of last year – with less than one per cent being NPL – said some main agricultural crops fetched higher prices last year while the natural phenomenon also benefitted people more than in previous years.
“The price of some main agricultural crops, though not all crops, were good last year and it brought a higher income for farmers compared to previous years,” he said, adding that farmers profited from the crops’ higher prices and had been better able to repay their loans.
He continued that in 2018, natural disasters like droughts or floods did not occur and it was very good for farmers.
Voeun said cassava prices were good last year as farmers could sell their crop at between 400 - 500 riel ($0.10 to $0.12) per kg on average.
It increased from just about 100 riel to 200 riel per kg in 2016 and 2017. He said the price of paddy rice was also good with an average of about 1,000 riel per kg. Rubber prices were slightly better last year too.
Pepper prices remained low though, but this was predicted by lenders as the price had been decreasing since 2016.
The NBC report said the total number of people with outstanding microfinance loans was 1.8 million at the end of last year. The report also revealed that microfinance institution loans reached a total of $5.4 billion at the end of last year while deposits were $2.5 billion.
Loans in the agricultural sector account for about 30 per cent of all lending in the microfinance industry and most loans are given for main crop production – rice, cassava, peanuts, corn, cashew nuts and rubber.
Emerging Markets Consulting (EMC) senior consultant Ngeth Chou on Monday said increasing consumer awareness on loan usage should be another important factor to keep NPL low in addition to factors related to crop prices and natural phenomena.
“Increasing loan disbursement and lenders maintaining low NPL rates reflect good loan quality and illustrate the health of the sector,” he said. “An NPL rate at just one per cent is a very good rate compares to the financial sectors of other countries in the region.”
Cambodia Microfinance Association (CMA) executive director Yun Sovanna said on Monday that the NPL is an indicator to assess risk appetite and portfolio quality of the microfinance sector, and that the Kingdom’s microfinance sector NPL rate is still low and manageable.
“In addition, it points to sectoral trends and loan management efficiency. So a low NPL is a good sign,” he said.
