Huge increase in MFI loans, deposits

Huge increase in MFI loans, deposits

More economic activity and a better understanding of using formal financial services among rural residents are leading to good loan performance rates and increases in savings deposits in Cambodia’s microfinance industry, according to industry sources.

The loan portfolios of the 35 registered microfinance institutions (MFI) and four NGOs that are members of the Cambodia Microfinance Association (CMA) reached $1 billion at the end of March, a 41 per cent increase from a year earlier, according to recent figures from the CMA.

Deposits made at seven microfinance institutions that are licensed to take deposits (MDIs) reached $346 million, a 145 per cent increase over the past 12 months.

“We are surprised at the big jump in this first quarter. A large contribution to the increase came from loans in the agricultural sector and for small business expansion,” said Bun Mony, president of CMA and general manager and chairman of Sathapana Limited. He said rural economic activity is growing and rural residents’ better understanding on using formal financial services is appreciated.

In addition, the rate of nonperforming loans (NPL) show the industry is growing in a healthy way. The NPL rate of over 30 days remained low, at just 0.3 per cent of the total loans in the industry.

According to the CMA data, among the top five microfinance operators, Prasac was the leader in offering loans during the period, with a total portfolio of $264 million, followed by Amret with $160 million and Sathapan with $129 million.

Hatthar Kaksekar Limited and Angkor Microheranhvatho Kampuchea (AMK) followed with $112.8 million and $64.5 million respectively.

This order is the same for the first quarter deposits.

Experts congratulated the MFIs on the big jump in deposits, saying that mobilising local savings is the way of cutting interest rates because it gives the institutions a pool of cash from which they can make loans to others, as traditional banks do.

Din Virak, founder and managing director of V CAPITAL, a local firm offering research and consulting services, said by using local resources [local savings], MFIs can prevent cash from flowing out to foreign financial institutions.

“Local saving gives MFIs a more stable foundation for their loan portfolios and, eventually, can lead to lower interest rates,” he said.

Mam Choeurn, chief operations officer at AMK, said the current rate offered on saving accounts is basically the same as what he pays for the money he gets from abroad.

“It is not yet a profitable price,” he told the Post. “But we are targeting [lower interest rates] in the long run and confident that we will see profits in the future.”

phnompenhpost