Logo of Phnom Penh Post newspaper Phnom Penh Post - Trade body, MFI hatching plans to fund rice sector

Trade body, MFI hatching plans to fund rice sector

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Cambodia exported 309,865 tonnes of milled rice in the first seven months of 2021, down by 27.27 per cent year-on-year. Heng Chivoan

Trade body, MFI hatching plans to fund rice sector

The Cambodia Rice Federation (CRF) and AMK Microfinance Institution Plc are brainstorming plausible approaches to jointly channel finance into the rice sector.

CRF vice-president Chan Sokheang, who is also chairman of the federation’s Investment and Finance Executive Committee, and secretary-general Lun Yeng had an online discussion with a high-level working group of AMK on July 29 to explore viable means and strategies to finance the sector, with a particular spotlight on rice mills and farming cooperatives.

Following the meeting, the CRF said the AMK working group would compile an in-depth analysis of the Cambodian rice industry’s current and future potential and opportunities, which it will use to draw up a plan to facilitate and expand the provision of credit and other types of financing for the sector.

Sokheang told The Post on August 1 that it is essential to the health and vitality of the sector for rice millers and farming cooperatives to secure financing for working capital needs, to build resilience and expand capacities.

He said the CRF provided more information to AMK during the meeting so that it could better develop products tailored to help the rice sector.

“Cooperation from commercial banks and microfinance institutions [MFI] on lending and financial support for the rice sector will increase in due course, on top of government schemes provided through the Ministry of Economy and Finance, such as credit packages for mills and companies that process and export milled rice to buy paddy from farmers, as well as other credit guarantees,” he said.

Cambodia’s rice millers often lack the capital to purchase large quantities of paddy or build rice processing plants. They also fall short on the collateral needed in order to secure loans from commercial banks and other financial institutions.

The government has reached out to the private sector to provide much-needed capital to rice millers, as public funding – through the state-owned Agricultural and Rural Development Bank of Cambodia (ARDB) and other means – cannot always meet the industry’s needs.

The rice sector has long struggled with underfunding, and its plight has been compounded by the EU’s reintroduction of tariffs on Indica rice exports from Cambodia – effective from January 18, 2019 – requiring the Kingdom to pay €175 ($210) per tonne in the first year, €150 per tonne in year two, and €125 per tonne in year three.

With 76 per cent of Cambodia’s population living in rural areas, the agricultural sector – of which rice is the largest component – accounted for 20.7 per cent of gross domestic product (GDP) and 31.2 per cent of total employment in 2019, Asian Development Bank (ADB) principal natural resources and agriculture economist Takeshi Ueda said in November.

On a related note, Cambodia exported 309,865 tonnes of milled rice in the first seven months of 2021, Minister of Agriculture, Forestry and Fisheries Veng Sakhon noted in a Facebook post on July 31.

According to data from the Ministry of Agriculture, Forestry and Fisheries, this represents a 27.27 per cent drop from 426,073 tonnes in January-July 2020 – but a 0.60 per cent surge from 308,013 in the same period in 2019. The reduction in exports was largely due to a shortage of shipping containers and lofty freight rates.

In August 2010, the government pledged to export one million tonnes of milled-rice by 2015. However, Cambodia exported 387,000 tonnes in 2014, 538,396 tonnes in 2015, 542,144 tonnes in 2016, 635,679 tonnes in 2017, 626,225 tonnes in 2018, 620,106 tonnes in 2019 and 690,829 tonnes last year. As of end-July 2021, the Kingdom is at just 30.99 per cent of this target.

Sakhon also remarked that Cambodian paddy exports to Vietnam jumped 81.34 per cent year-on-year in the first seven months of 2021. This means that Cambodia sold over 2.02 million tonnes of paddy to the neighbouring country, given that the Kingdom exported 1.115 million tonnes in January-July 2020, as previously noted by the minister.

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