Microfinance in Cambodia is still growing, but not at the 20 to 40% rate of growth as it was preducted earlier

Microfinanciers brace for slower growth rate in 2009
Written by Kay Kimsong
Friday, 19 December 2008

Less capital from abroad means that microfinance institution growth
may drop by to much as half in the coming year, industry sources say
MICROFINANCE institutions say they expect lower growth next year,
expanding by no more than 50 percent, due to the deepening global
financial crisis, revising down expansion estimates of as high as 100
percent.

But despite the downturn, double-digit growth during the last three
years should cushion the impact of the worsening credit crunch, and
most lenders say that a hike in interest rates is unlikely.

"We will be OK for the next few years, but we plan to reduce our rate
of growth in the next year," said Chea Phalarin, general manager of
Amret Microfinance.

He said Amret expansion would be between 20 percent and 50 percent,
down from earlier estimates, but that the health of the sector was
generally good.

"Amret will face no shortfall in financing from outside creditors or
investors," he said.
"We can find enough sources of capital for 2009," Chea Phalarin said.


--------------------------------------------------------------------------------

We are still growing, but not at the 20 to 40 percent we had
predicted.

--------------------------------------------------------------------------------

Amret last week received US$4 million in loans from the French
Development Agency, or AFD, which will support up to 20,000 additional
clients, he said, adding that Amret currently has 230,000 clients.

Chea Phalarin said Amret has already lent $54 million to micro-,
small and medium-sized businesses in 14 provinces.
While the bank had hoped to expand its lending to $80 million in 2009,
Chea Phalarin said loans would now only reach $65 million to $70
million, largely because of defaults on loans as the garment, tourism
and agricultural sectors continue to suffer from a slowdown in markets
abroad.

"If we lend too much, we will have trouble controlling risk. So, for
my institution, we have to be very careful in targeting future growth
rates," Chea Phalarin said.

Say Sony, marketing manager for Prassac Microfinance, which has lent
$57 million to 98,000 clients, agreed that the world's market meltdown
would affect lenders locally, but marginally.

"We are still growing, but not at the 20 to 40 percent rate we had
predicted for next year," he said.

Rate hike?
Despite the slowdown, lenders said that an interest rate hike was not
likely if overseas creditors did not put pressure on local
microfinance institutions.

"We don't have a serious problem yet. Most of our financing comes from
Europe, not from the United States," Say Sony said.
"Once creditors propose new rates for us, we will have to consider
increasing our interest rates for borrowers as well."

Amret's Chea Phalarin, however, said the company is aiming to maintain
its rates of between 2.25 and 3.0 percent.
But others said Cambodia's microfinance sector had to also actively
protect itself from overseas credit turmoil.

Proactive approach
"We hope we can become more independent, so that donors won't always
be supporting MFI institutions," said Kea Borann, a member of the
Cambodia Microfinance Association (CMA) board of directors.

The CMA will begin training sessions led by foreign lending
professionals in a bid to strengthen the sector against outside
forces.

"We have played a large role in organising much-needed training
programs for microfinance institutions. If all MFIs continue to
improve the quality of their service, they should be able to avoid any
future crisis," he said.

At a conference on microfinance and the financial crisis held in
November, delegates said they were relatively safe from the
international upheavals.

"The strongest message from the conference was that deposit-taking
MFIs are well-insulated from refinancing risks," said a report from
the conference.

It added that panic over the global banking situation has been largely
limited.
"Large-scale savings withdrawals have occurred only in isolated cases
where other factors were already at play beyond the financial crisis,"
the report said.
.

Relevant Pages