Cambodia MFIs: At the forefront of agricultural finance
The government of Cambodia is in full-swing mobilizing resources to upgrade the country’s infrastructure in support of agricultural development. Roads, ports, irrigation and other support facilities are fast-tracked to reach the target of making Cambodia one of the main rice-exporting countries in the region, in the league with neighboring Thailand and Vietnam. Resources for these upgrading projects are sourced from a mix of loans from bilateral and multilateral agencies and from private investments.
In the absence of a massive government financing program for agriculture, resources for the production phase remains with the informal moneylenders and the microfinance institutions. For small farmers, these two sources are the most accessible and relevant to their needs. Of the 32 MFIs licensed by the National Bank of Cambodia (NBC), almost half has loan products for agricultural production. It is estimated that more than half of the $732 million outstanding loan portfolio of the microfinance industry is invested in agricultural production and other agriculture-related economic activities, benefitting 1.1 million clients nationwide.
The MFIs have also started re-designing their loan products. Most are still having the traditional group or individual loans, but some have already fine-tuned their products, infusing features that fit to the needs of the farmers. In a project funded by European Union (EU) and the Agence Francais de Developpement (AFD), MFIs are assisted to develop agricultural-microfinance (AMF) loan product. The loan product will specifically be used for agricultural production and agriculture-related economic activities.
The contribution of the MFIs in the development of agriculture is also part of the poverty reduction goals of these institutions. While most MFIs started as non-government organizations and projects of development agencies, social mission is considered as the ultimate mandate even as commercial investors are gradually becoming the main source of funds.
The situation in Cambodia where the private sector is the main providers of funds is better compared to other countries where the government is heavily involved through special government-owned banks. With a subsidized lending program, inefficiencies are shouldered by the taxpayers and also developed dependency among the farmers.