Borrowing Fund from the government

 Special Fund Project to support Rice Miller Association

According to the highest recommendation of Samdech Akeakmohasenapadey Dacho Hun Sen Prime Minister of the Kingdom of Cambodia and following the care from the Ministry of Economy and Finance and Supreme National Economic Council, RDB is responsible for implementation the special loan provided by the government included the counterpart fund of RDB as a working capital to the Rice Miller Associations and Rice Market in the purpose of purchasing paddy during the harvest season, preventing paddy outflow and enhancing domestic recycle, increasing value added, increasing the number of stock for national food security, and the rice market competition both price and quality, especially, transforming the paddy exporting to the rice exporting. This financing has been started since 2005 in the amounts of USD 2 Million and increased to USD 4 Million in 2006, USD 6 Million in 2007 and up to USD 16 Million in 2008. As the result, this project is taking part in pushing the rice price in Cambodia to the lower rate growth
comparing to the neighboring countries and world market.

GRANT FUND

 AFD

The French government has provided a grant to the Royal Government of Cambodia through the Ministry of Economy and Finance to support  micro finance activities in Cambodia with the ultimate goal to alleviate rural poverty and to raise the  living standards of the rural population.. So far, the French government has provided funds to support micro finance in Cambodia through Agence Française de Développement (AFD) amounting to 10 million Euros.

www.afd.org

INTERNATIONAL BORROWING FUND

 IFAD LOAN PROJECT

The main objective of International Fund for Agriculture Development (IFAD) project is to increase food and income security for 60,500 households in target villages, communes and districts of the four provinces (Pursat, Battambang, Banteay Mean Chey and Siem Reap). The project consists of three components, such as agricultural development; rural micro-finance; project support and co-ordination.

The IFAD project is six years (2000-2005), with total project costs of USD 11.55 million: USD 8.6 million loan from IFAD, USD 1.78 million grant for technical assistance from AusAid and UNDP, and USD 1.17 million from the Government and beneficiaries.

IFAD provided to Royal Government of Cambodia (RGC) through Ministry of Economy and Finance (MEF) a loan amount of US$ 8.6 million with 40 years of repayment and 10 years of grace period. Interest will be 0.75% per annum.

For agricultural development and project support and co-ordination, RGC/MEF provided USD 7.3 million to support ADESS program (ADESS – Agricultural Development to Support Seila) for training agricultural technique and fund for farmers in the target areas (PSP – Production Start-up Programme and AIP – Agricultural Improvement Programme).

In the same time, RGC/MEF lent to Rural Development Bank (RDB) about US$ 1.3 million for the implementation of Rural Micro-finance component, in 15 years loan period with 7 years grace period. Interest rate is 3% per annum in USD and 6.8% per annum in KHM (Khmer Riel).

RDB funded the Micro-finance Institutions (MFIs) and Non-Government Organizations (NGOs) which are registered at the National Bank of Cambodia (NBC). RDB lent to MFIs/NGOs for the period up to 10 years with 5 years grace period based on their performance. Interest rate is 7% per annum in USD and 11-12% per annum in KHR. Then, MFIs/NGOs shall on-lend to target group/farmers based on the prevailing market rates.

There are three groups of activities for which potential borrowers from the IFAD target group might require credit: (i) crop and livestock production; (ii) agro-industry and manufacturing; and (iii) trading and other services. Based on the available information, a total of 12 activities within the above categories are: (1) crop production (paddy and other crops); (2) small-scale pig production; (3) small-scale poultry production (chickens and ducks); (4) palm sugar collection; (5) weaving floor mats; (6) small rice mill; (7) general trading (e.g. groceries, fruit and vegetables, agricultural inputs and outputs, etc.); (8) rattan furniture making; (9) construction of oxcarts; (10) repair workshops: pumps, motorcycles, radios and televisions; (11) transportation, including animal-drawn carts and motorcycles; and (12) small-scale irrigation.

Now, there are 6 MFIs/NGOs which are participating in this project in four provinces (Pursat, Battambang, Banteay Mean Chey and Siem Reap). Each target province has at least 2 MFIs/NGOs that are providing credit to farmers.

 ADB LOAN PROJECT

ADB Loan No. 1741-CAM (SF): Rural Credit and Savings is one of the 20 loans approved by ADB's Board of Directors on April 27, 2000. The loan project was signed between the Ministry of Economy and Finance of the Royal Government of Cambodia and the Asian Development Bank, dated July 7, 2000. After that, the loan became effectiveness on March 29, 2001. The objective of Asian Development Bank (ADB) project is to develop effective financial services in the rural areas, which will provide poor households with better access to rural finance. The project scope will include the provision of credit lines to finance income-generating activities of the rural poor, support for rural credit and savings schemes of Licensed Financial Institutions (LFIs). The project will cover the operations of LFIs throughout Cambodia.  The project will contribute substantially to the national goal for poverty reduction through the provision of income-generating activities and sustainable savings facilities for households in the rural areas, where about 85% of the poor people are living. During the implementation period, the project expected to directly benefit approximately 65,000 rural households. More than 50 percent of the subborrowers are expected to be rural women, households and can enhance their access to other social services being provided by the prospective LFIs. The project consists of seven components, such as agricultural production; retail trading; pig raising; rice milling; silk weaving; brick making; and small-scale irrigation.

ADB provided to RGC through Ministry of Economy and Finance (MEF) with a loan amount of US$ 5 million for 32 years, with 8 years grace period at 1% of interest rate per annum during the grace period and 1.5 % per annum thereafter.

ADB project is five years (2001-2005), with total costs of USD 6.64 million. The ADB loan is USD 5 million.  The balance of US$ 1.64 million will be financed by the Royal Government of Cambodia (RGC) and LFIs. The Government provided Rural Development Bank (RDB) with lines of credit of US$ 4.8 million under a subsidiary loan agreement, which covers a period of 20 years with a repayment schedule similar to that between the RGC and ADB. The credit lines is provided to RDB at rates, not less than LIBOR six-month deposits in dollars on the Dow Jones Telerate Service, 30 November 2001, which rate shall be reviewed and revised every year.

RDB shall make loan to LFIs (Commercial Banks, Specialized Banks, and Licensed Micro-finance Institutions [MFIs]). RDB lent fund to LFIs with an interest rate of the LIBOR 6 month plus 4% per annum in USD and plus 6% per annum in KHR (Khmer Riel) for the period of 3 to 5 years with review of 18 months.

The participating LFIs shall make loan from this fund to end-borrowers with the interest rate of 30%-40% per annum or 2.5%-3% per month. In addition, LFIs shall only finance subprojects for the income generating activities of sub-borrowers, which contribute to agriculture and rural development. Sub-loan made by any LFI shall not exceed the equivalent of 10% of its networth.

Up to Now, there are 6 LFIs which are participating in this project.