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RURAL
CREDIT IN CAMBODIA: |
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INTRODUCTION:
Cambodia is a developing
country, covering a surface of 181,035 km2 with a total population of 13.2 million people, equivalent to 2.188.633 households. Eighty-five percent of
the population lives in rural areas where farming, fishing and traditional
crafts are the daily business activities.
The Royal Government of Cambodia
gives top priority to its social development program for poverty alleviation
in rural areas and uses all means and resources for the rehabilitation of
economic development in order to raise living standards of Cambodia people.
As a result, the number of people classified as poor was reduced from 39% of
total population in 1993 to 36% in 1999. For the past several
years, the Royal Government has achieved good results in bringing political
stability to the whole country. Stability is the key to an inflow of domestic
and foreign investment for the promotion of growth in the industrial sector and
tourism, which contribute to rural economic development both directly and
indirectly.
The
Royal Government has introduced two key mechanisms for poverty alleviation:
Public investment program for
the rehabilitation and strengthening of infrastructures and expansion of
services of social development through the Ministry of Agriculture Forestry and
Fishery, Water and Meteorology, Rural Development, Health, Women and Veteran’s
Affairs and Social Fund, etc.
Support and strengthening of
micro finance services in rural areas through the Rural Development Bank and
national and international micro-finance operators (MFOs) for provision of
credit services in support of agriculture and rural economy based on free market
for development, efficiency and sustainability.
Micro finance services,
particularly credit, were crucial in the promotion and development of farmers in
the 90s.
The Royal Government of
Cambodia (RGC) clearly recognizes micro finance as a vital mechanism in its
assistance to community development in all fields. In this connection, rural
credit services are being provided actively and directly to the people
throughout the country. Although this is a new sector for Cambodia, everything
is being improved and grows quickly with the active support of the RGC. Many
important strategies for developing this sector viably over the long term were
designed.
Provision of micro financial services:
15 commercial banks in Cambodia provide banking and credit services
only to the urban areas; hence, the rural population has no access to the
financial services of commercial banks (except ACLEDA Bank).
Micro finance services
consist of individual credit, group credit, saving, training, monitoring and
advisory services to the borrowers. The interest rates that micro finance
operators charge range from 3% to 5% per month based on the institutional policy
and cost consideration of each operator.
The first operators providing
credit services were: UNICEF, MOWA starting since 1989, and subsequently
WVI-C established in 1990 and EMT/GRET starting in 1991. At present, there are
15 licensed Micro Finance Institutions and around 30 registered NGOs
operating throughout the country. The volume of credit provided by those
operators is approximately USD 80 millions including ACLEDA Bank (as of the end
of June 2004)
which covers approximately 400,000 households.
Mobilization of domestic
savings is the main source for local rural credit. Credit operators mobilize
savings only from their members.
The total capital requirement for micro finance
in the whole country is estimated at about USD 150 million.
Rural credit policy of the royal government of Cambodia
Credit is an important
mechanism for rural development whose role is to create and diversify employment
as well as to enhance productivity and generate income, so that the standard of
living of the people is improved. It takes an active part in the poverty
reduction and rural development processes.
Legal Framework for MFIs
Governance.
The Law on Banking and
Financial Institutions was promulgated on 18 November 1999. A Prakas on the
licensing of micro finance institutions issued by the National Bank of Cambodia
on 11 January 2000 provides opportunity to national and international financial
organizations, credit operators to transform themselves into MFIs and to join
the formal banking system. Moreover, it also gives them the access to financial
resources from national and international financial institutions, especially
from the RDB.
i) Main points of regulation:
All non-governmental,
association, entities or MFIs not satisfying the license requirement, but still
provide credit services to individuals or solidarity groups, shall register with
NBC.
All MFIs, non-governmental
organizations and associations, whether licensed or registered, shall be
excluded from:
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Leasing, derivatives and dealing in gold, precious metals, raw material and commodities, whether spot and forward
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Providing payment services through checking accounts or swap or forward dealing in foreign currency.
An applicant for a MFI license shall be incorporated as a limited liability company or a cooperative.
A licensed MFIs shall have a minimum registered capital of KHR 250,000,000.
A MFIs license is valid for a period of 3 years from the approval date.
The institutions shall pay a fee of KHR 50,000 upon submission of the application for a license.
An institution shall pay an annual license fee of KHR 1,000,000.
Specialized Banks
& Licensed Microfinance Institutions
ACLEDA is the first credit
operator receiving authorization from the National Bank of Cambodia to operate
as a first specialized bank in Cambodia. On 1st December 2003, the National Bank
of Cambodia granted ACLEDA
Bank a full commercial banking license. Other Specialized Banks:
Other credit operators namely AMRET, CEB,
HATTHAKASEKAR, TPC, Tong Fang Microfinance, Seilanithih, CREDIT, Vision Fund,
PRASAC, AMK, CBIRD, CHC, FUDF, Intean Poalroth Rongroeung and Maxima have obtained a license to operate as a micro finance
institution.
Strategy Action Plan
With the active participation of National Bank of Cambodia, Rural Development
Bank and donors as well, the Royal Government of Cambodia has introduced some
guidelines and a strategy action plan that includes the following:
- To extend financial services to medium and long terms requirements;
- To reduce interest rate;
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To encourage wide competition among micro finance operators to reduce interest rate and operate more efficiently and a sustainable manner;
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To connect farm products to domestic and international market with the provision of credit support to business network and farm processing industry;
- To provide technical training to operators for efficiency in operations;
- To promote domestic savings mobilization;
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To continue to attract financial resources and technical assistance from domestic and foreign countries; and
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To promote local authorities to act as facilitators in coordination and cooperation with micro finance operators.
An appropriate legal framework ensures that micro finance activities are conducted in sustainable manner. The government must promote the licensing of financial institutions.
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