NBC, CRF Offer Rice Loan Support

KHMER TIMES
MAY KUNMAKARA

To qualify for the government’s emergency loan, millers need large stocks of stored rice to put up as collateral. Reuters

In an effort to help small and medium-sized rice millers and exporters that are presently unable to provide suitable collateral to qualify for the government’s emergency $27 million rice loan, the National Bank of Cambodia (NBC) has joined with the Cambodia Rice Federation (CRF) to call on the financial sector to be more flexible.

According to a joint report released yesterday, the NBC and CRF will work together to ensure that millers are able to use other methods to secure loans to allow them to buy and process paddy rice during the ongoing harvest.

At present, to qualify for the government’s loan, distributed via the Rural Development Bank, millers need large stocks of stored rice to put up as collateral. That loan was unveiled last month as an effort to combat falling rice paddy prices and cash-flow issues that have caused unrest in the rice industry during peak harvest time.

“Based on the results of our research into increasing the financing for the agricultural sector, the banks and microfinance institutions should consider the capability of repayment rather than collateral by using data from the Credit Bureau, which analyzes and evaluates customers and could pave the way for those who lack suitable collateral to get access to loans,” the report says.

“The acceptance of only non-movable assets [land, buildings etc.] as collateral can exclude customers who don’t have fixed assets...so the financial institutions should consider inventory financing and warehouse receipt financing to be one form of giving loans to customers,” it adds.

Bun Mony, CEO of the newly formed Sathapana Bank, welcomed the initiative but stressed that the NBC must further clarify how to accept moveable assets as loan collateral.

“Of course, some banks or MFIs [microfinance institutions] already do this but not widely. We don’t mind treating movable assets as the collateral in order to give more loans to those millers or exporters, but we also want the National Bank of Cambodia to make sure that we have the proper regulations to avoid any risks,” Mr. Mony told Khmer Times.

“Actually, in many other countries they accept movable assets as the collateral for loans but we are not clear on how to control and manage them [in Cambodia] if the owners sell them without informing us – that is the risk. But, if our regulator can guarantee that, we are keen to do it.”

A leading rice miller and exporter, who asked not to be named, said that the idea has been discussed for almost five years already with input from major multilateral institutions such as the World Bank and the Asian Development Bank.

“It will not make any different by just recommending this system, as what we really need is a legal framework which includes insurance to cover the risks, and guarantees from the government.”

“It is true that most banks still prefer fixed assets for financing, but the biggest issue or challenge is not about financing but the lack of low-interest financing that the millers and exporters are crying out for.”

“We are competing against regional and global players like Vietnam, Thailand and India for the same market so cost competitiveness is the biggest issue that Cambodia needs to overcome if we want to survive and able to realize the  one million ton [export] target,” they said.

According to the joint report, the financial sector has disbursed some $2.3 billion – $1.2 billion from banks, and $1.1 billion from MFIs, to the agriculture sector. Seventy percent of loans from banks, and 22 percent from MFIs went to rice millers and exporters.