MFIs still seeing significant growth

Outstanding loans and deposits in 28 of Cambodia’s microfinance institutions rose between 30 and 40 per cent year-on-year in 2011, official data from the Cambodian Microfinance Association indicated.

The CMA’s data showed outstanding loans rose 41.5 per cent from US$916.3 million with 1.3 million borrowers in 2011, compared to $647.8 million with 1.22 million borrowers a year earlier. 

Deposits grew by 32 per cent to $1.26 billion with 1.1 million depositors, compared to $952.2 million with 36,776 borrowers in 2010. MFIs in the Kingdom first began to take deposits in early 2010. 

Non-performing loans (NPL) declined from 1.3 per cent of the loan total to 0.4 per cent. Officials and insiders said a strong macro-economy performance and clear regulations were responsible for the shift.

National Bank of Cambodia director general and spokeswoman Ngoun Sokha recognised the favourable direction the economy was heading, especially in the agricultural sector, which she believed was responsible for the rising demand for loans.

“The government supports the agricultural sector, especially the export of milled rice. So we promoted the adoption of MFI loans for agriculture and actually received a lot of growth in that area, adding up to more than 50 per cent of all loans,” she said. 

Bun Mony, director of CMA and chairman of Sathapana Microfinance, told the Post that loan portfolios at Sathapana rose about 65 per cent to $94.6 million compared to $57 million in 2010. The number of borrowers grew from from 43,565 to 55,001.

“There was a high demand for loans as business activities continue to grow, and we don’t even seem to have any problems with repayment,” he said, adding that the NPL rate declined to from 0.93 per cent to 0.22 last year.

Sathapana provides loans to all sectors, with 40 per cent going to retail and small businesses, and more than 20 per cent to the agricultural sector.

The country’s biggest MFI, Prassac Microfinance, reported that by December 2011 its gross loan portfolio was $151 million, an increase of 43.6 per cent, with active borrowers increasing 10.9 per cent to 125,127.

“In general, I think that the industry performed well last year because all MFIs grew their portfolios while the NPL rate decreased,” Sim Senacheert, president and CEO of Prassac, said.

Prassac loans to the agricultural sector accounted for 33 per cent of its total portfolio, with trading and service making up 47 per cent.

Hout Ieng Tong, general director of Hattha Kaksekar Microfinance, reported that loan portfolios rose 70 per cent to $75 million with 62,703 borrowers, from $44 million with 47,952 borrowers the year pior. 

He added that NPL declined from 0.9 to 0.07 per cent, and that agricultural loans accounted for 35 per cent of total stocks at his compay. Sathapana Microfinance’s total deposits rose 129.4 per cent from $39 million to $17 million, while Hattha Kaksekar’s total deposits grew more than 160 percent to reach $15.78 million compared with only $5 million the year before. Prassac reported smaller increases, as its operations just began in mid-2011.

The successes are tempered, however, by the uncertain economical fates of the EU and US, where much of the industry gets its primary funding. “We are a bit worried,” said Bun Mony. 

“We see the EU in a crisis, and think there could be some slight impact on us, specifically regarding investments.”

Ngoun Sokha suggested a solution, saying, “We try to teach MFIs good governance, and to strengthen their internal capacity for infrastructure, so that they will be able to easily seek a source of funds domestically rather than just looking abroad.”

PM pushes edible exports

Prime Minister Hun Sen yesterday urged Cambodian food and beverage companies to look to export markets. 

The call, made at the opening ceremony of the Khmer Brewery, came in the wake of similar exhortations from international organisations for Cambodia to diversify its exports.

“Now, we are not only expanding our locally made products in the domestic market. We have to promote export products and beverage abroad,” Hun Sen said. “The big problem for us is to make sure that we what produce is good quality and affordable at that segment of the market.”

In 201, the food and beverage industry contributed about US$1 billion to gross domestic product, 40 per cent of it from the brewing industry. 

Khmer Brewery, one of six breweries in the country, planned to export its Cambodia Beer brand, company chairman Leang Khun said yesterday.

“We will soon start exporting Cambodia Beer to developed countries such as Japan, the US and the European Union,” he said. 

The $60 million local investment has produced beer since late last year. 

Yesterday was the official opening of the factory, which is located in Phnom Penh’s Dangkor district.

Ngov Heng Fish Sauce Cambodia exported its sauce to the US until 2009 when the company ran into some capital constraints, owner Chan Sitha said yesterday. 

He said more government support was needed for small- and medium-sized enterprises (SMEs) to succeed on the international market. 

“We did not have any problem with our exports to [the US] in terms of quality, something that was recognised as being good. But, the problem for us was the money. This business takes time and more money,” Chan Sitha said. “Of course, I plan to resume my exports but now I need to seek more capital. The government should help us if they want SMEs to export more.”

General director at the Men Sarun Mee Yeung noodle factory Linh Thorn told the Post earlier this year that his factory would look to export to the United States and Europe in the near future. 

Cambodia’s domestic food and beverage industry was strong, Suy Sem, the Minister of Industry, Mines and Energy, said at yesterday's ceremony.

When the country’s garment industry was ailing during the global financial crisis in 2009, the value of the food and beverage industry had continued to rise, he said.

The Phnom Penh Post, 

Mom Kunthear Tuesday, 15 May 2012

Will pressure make Chinese aid more transparent?

Critics have long characterised China as a secretive donor in economically poor but resource-rich countries, funding infrastructure construction in an unspoken bid for business deals and access to natural wealth and land. 

While China disburses aid with a scant paper trail, analysts say strong-arming its government to boost transparency – and aid efficacy – may hurt countries in need. 

Chinese-funded projects have become ubiquitous in Cambodia, Laos and Myanmar, countries once passed over by traditional donors. 
In river-rich Laos, a government development plan calls for 55 new dams to generate hydroelectric power, many of them funded by Chinese state-owned companies. 

Media there reported that China’s government recently signed five agreements pledging more than US$30 million to build government offices. 

Prime Minister, Hun Sen inaugurated one of the largest Chinese construction projects in the Cambodia in December 2011, a dam in Kampot province. This project comes on top of $1.2 billion the Chinese government pledged to Laos in 2010 - more than any other bilateral or multilateral donor. 

Officials also welcomed Chinese aid in August 2011, when the World Bank suspended new loans to Cambodia after finding that a Bank-financed land-titling project failed to secure property rights for residents facing eviction. 

Cambodian leaders – including the prime minister – have repeatedly stated they are not worried about losing World Bank loans because they prefer “no strings” Chinese aid. 

Elsewhere in the region, media have reported ongoing talks between the Burmese government and the China Power Investment Corporation to restart construction of the US$3.6 million Myitsone Dam, which Burmese president Thein Sein suspended in September 2011 over concerns about transparency and environmental damage. 

Despite the chronic tensions between China and Myanmar over drug trafficking, refugee outflows and ethnic conflicts along their shared border, the Chinese government is one of Myanmar’s largest investors.

“China’s aid is focused on infrastructure, which is badly needed in developing countries,” said Wang Yong, director of the Centre for International Political Economy at Peking University in Beijing. “By comparison, US aid is more driven by strategic and political objectives.” 

With almost no information available about China-funded projects in the public domain – including their potential environmental impact – EarthRights relied on company press releases and government statements. Other NGOs in the region have complained that environmental impact assessments are often not open to local communities or there is too little time to comment. 

Chinese aid is disbursed in line with its policy of staying out of other countries’ governance, as laid out in its April 2011 aid position paper.

“It might interfere in other ways, like currying favour and obtaining sweetheart deals for its companies…Their Ministry of Commerce determines the aid, which tells you just what’s driving their considerations,” said Sophal Ear, a California-based political economist specialising in aid and governance. 

China’s estimated US$3.18 trillion in foreign exchange reserves can be enormously” transformative for poor countries, Ear added. 

Pressure pitfalls 

Aid watchdog NGOs like the London-based Publish What You Fund use publicity to urge China to be more forthcoming with its aid figures, hoping such scrutiny will help money get to the people who need it most. 

The NGO lists China as “very poor” in aid transparency, ranking it the third least transparent donor out of 58 ranked last year.

Its position was determined by 38 indicators, such as the passage of freedom of information laws and participation in the International Aid Transparency Initiative (IATI), a London-based group of donors and NGOs that have set aid disclosure standards. 

“The problem is that China is not systematically releasing its information,” said Karin Christiansen, Publish What You Fund’s director. 

While transparency is a good route to achieving aid effectiveness, pressure may not work, said Ear. Strong-arming China into transparency will lead to a “backlash” of even less transparency, he added. “They value their sovereignty more than most countries. They see it [as] inviolable.” 

Still, said Christiansen, the group’s approach is credible because it does not require “changing what they [China] are actually doing, but about becoming more transparent on the approaches they are already taking”. 

South-South rules 

The country is increasing aid transparency at its own pace, say observers. Last December, China publicly declared transparency a principle it upholds when it signed an agreement at the Fourth High Level Forum on Aid Effectiveness held in Busan, South Korea. 

The word “transparency” appears four times in the document, which includes a pledge of “zero tolerance for all corrupt practices”. It also notes that “the nature, modalities and responsibilities that apply to South-South cooperation differ from those that apply to North-South cooperation”, and the complexity of “new actors”, who may still face poverty at home but want to share lessons and experiences along the way. 

Unfavourable attention may have prompted China to become more public about its aid policy, said Wang. “The Chinese government does care about its international image and the international media.” 

Even with the will to boost aid transparency, China still faces a “diplomatic dilemma” in enforcing it: to meet compliance both sides must be willing and able, and recipient countries with weak governments often have poor aid oversight. 

“To carry out this principle [transparency] is not so easy in practice because it is influenced by circumstances of the governance structures of recipient countries and diplomacy, sometimes requiring some form of confidence,” Wang said.

The Phnom Penh Post, IRIN Tuesday, 01 May 2012