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Cambodian Microfinance in Agriculture

Issues and Challenges

 

Cambodian Microfinance

Introduction

Operation Department 2

Cambodia Demographic and Microfinance Industrial Data – June 2013: Population: +14 millions Estimated population below poverty line: 20% Rural population: about 11 Millions Number of MFIs: 37 Loan outstanding: USD 1,088 Millions Deposit balance: USD 378 Millions Number of active MFI borrowers: 1,398,056 Number of active depositors: 969,523

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Introduction

Operation Department 3

Distribution Network

Sathapana Makes Your Life Better

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Year No of branch

No of staff

2013(E) 75 1,897

2012 65 1,710

Distribution Network

Phases of Microfinance Development

1990 – 1995: Start-up Phase

1995 – 1999: Government-Supported Institutionalization

1999 – Present: Commercialization and Consolidation

Development Stage

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Business Nature In early stage, MFIs in Cambodia have shared

more or less similar mission and vision brought from their former status of NGO to licensed and registered MFIs.

The main theme of their mission and vision have been driven and dedicated to social and economic development in rural area whereby it serves as a contributing factor for the Government’s goal of poverty alleviation.

MFIs’ Business Nature

Operation Department 6

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Microfinance Operators

Items 2008 2009 2010 2011 2012 June-2013

Number of Licensed MFIs 17 20 22 28 35 37

CMA members 17 20 22 MFIs & 1 NGOs

28 MFIs & 2 NGOs

33 MFIs & 2 NGOs

35 MFIs & 5 NGOs

Microfinance Operators

Cambodian Microfinance

Issues and Challenges

Operation Department 8

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Issues and Challenges

Legal Framework limiting the ability of MFIs to diversify products and services.

High Cost of Fund - High cost of fund prevents MFIs from achieving their potential in helping to develop the rural economy as well as the country as a whole.

Multiple Loans - The prevalent of multiple lending, whereby an individual has taken out loans from more than one MFIs, has reached a strenuous point.

Lack of a thorough credit assessment as many farmers don´t have a credit history, no bank accounts, and insufficient financial management capacity of the farmers.

Multiple land titles – Multiple land titles for the same land lot to villagers continue to be issued and duplicates are provided as collateral for loans to multiple MFIs.

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Issues and Challenges

High transaction costs due to geographical dispersion of clients and poor infrastructure.

Staffing Issue - Difficulties in finding, hiring and keeping well trained staff who is willing to work in a rural region.

Absent of Risk Transferring Tools – Both agriculture guarantee and credit insurance yet to be implemented to address production risks faced by famers as well as credit risks faced by Financial Institutions.

Oversaturation - Some regions are experiencing an oversaturation of MFIs, with the ration of MFIs to population having reached a point where MFIs are facing increasingly unfair competition.

And Finally …….. For MFIs to achieve their potential to serve more

clients, they need to be able to offer a wider range of products and services, and to reduce their cost of funds so as to remain commercially sustainable, while serving the lower end of the market.

Providing a legal framework that would enable MFIs to offer more products and services would help generate further growth in the sector, and to improve access to finance for many more Cambodians.

And Finally …..

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Thank You for Your Kind Attention

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