Central bank orders microfinance institutions to step up lending in riel
Central bank orders microfinance institutions to step up lending in riel
Cambodian microfinance institutions have said they would comply with a new regulation issued by the central bank that requires them to hold at least 10 percent of their loan portfolio in the Kingdom’s national currency.
A prakas published by the National Bank of Cambodia (NBC) on December 1, requires all MFIs to adopt the measure over the next three years in order to promote riel usage, adding that the central bank could take any necessary action if needed to make lending institutions comply.
Lay Kimchhen, CEO of Niron Microfinance Plc, said yesterday the company had been notified about the new prakas and was taking steps to expand its use of the national currency.
He insisted that Niron would not face issues implementing the policy as it already held riel and issued loans using it, but said it could prove challenging for some other microlenders.
“This policy could prove difficult for MFIs that have foreign shareholders as they could face issues with currency exchange rate fluctuations,” he said.
Po Orors, chief operating officer of Mothers Financial Japan Plc, a Japanese-owned MFI that launched in April, said the institution was fully reliant on holding a loan portfolio in US dollars.
“We are a newcomer, so we always follow what the customers demand and that is always to have loans issued in US dollars,” he said.
“It will be challenging for us to meet the requirements, but at least the NBC has given us time to implement the policy,” he said.
“We will set up a new team that will focus on customers who need to use the riel.”
“Still we will face the issue of exchange rates and we need to find out how to get rid of that risk,” he added.
