BY SOY SOPHEA
The International Finance Corporation (IFC), a member of the World Bank Group, has announced pledges to provide more support for microfinance projects in Cambodia. This will help local institutions expand their business in remote areas. The pledge was made at a signing ceremony between IFC and Angkor Microfinance Kampuchea (AMK) on October 21 in Phnom Penh.
Given the global financial crisis, this news is of particular interest to Cambodia where more than one third of the population lives under the poverty line and where more than 80 percent of population resides in rural areas where unemployment remains a problem.
Lars Thunell, Executive Vice President and CEO of IFC, said that AMK is Cambodia’s largest microfinance institution. He said that with this agreement, the IFC would also be able to offer advice on new strategies and the development of new financial products and services.
“Microfinance institutions have an important role to play in Cambodia, and as various institutions merge together, this roll will become more important. AMK will help extend much-needed services to parts of the country where the need is at its greatest,” he said.
Thunell also said that the IFC has pledged to double its global support for microfinance to over $1.2 billion over the next three years.
Paul Luchetenburg, CEO of AMK, said that the reputation and experience of IFC will be of great support to AMK as it strives to meet the goal of making affordable finance available to as many poor families as possible in Cambodia.
“Cambodia’s registered microfinance institutions are cheaper and more reliable than unregulated money lenders and pawn brokers who charge very high interest rates. We are also accountable to the government and shareholders, ensuring high standards of service, governance, and transparency,” said Luchetenburg.
He added that to date, AMK has served more than 180,000 clients. Much of this service provision has been in remote and rural areas not covered by other MFIs. He said that next year his agency will offer the opportunity for customers to open savings accounts. These will help customers keep track of their hard earned cash, and provide access to cash to lend to other borrowers.
He added that microfinance can improve living standards and it gives micro borrowers the opportunity to use their greater earning potential to pay for better housing, transportation, and more years of schooling for their children.
Tal Nay Im, Director General of the National Bank of Cambodia (NBC), said the partnership reflects the commitment of both organizations to reach the deserving people in remote areas. She said that in just ten years, countless families have made the transition from donor dependence to independence. They have served more than 767,015 borrowers with loans amounting to 1,057 billion riel (about USD 257 million).
“We at NBC are very proud of our contribution to the success of Cambodian microfinance,” she said in her speech. “By developing the legal framework for micro finance, we have ensured that MFIs meet the highest accounting and reporting standards.”
The Director stated that with IFC assistance, her agency is developing regulations to allow the establishment of private credit bureaus. This will serve both the banking sector and MFIs enabling them to better assess the risk in lending. She promised that these private credit bureaus, which are expected to be operational for the stock market launches in late 2009, will give banks and MFIs comprehensive information on potential borrowers.
She added, “NBC will continue to enhance the regulatory environment to support a vibrant and diverse microfinance industry. This may include helping MFIs to substantially broaden product offerings so they can better meet the needs of their clientele. At the same time, a key concern of NBC will be ensuring sector sustainability, as we encourage MFIs to remain within the dictates of rational economies of scale.”
In Cambodia, the IFC has made direct investments as well as attracting international capital to the microfinance sector. A good example is IFC’s partnership with ACLEDA which has transformed itself from an NGO into one of the largest commercial banks in the country.
The IFC’s other contributions include providing advisory services and training through the Cambodia Institute of Banking and helping establish and support the Cambodian Microfinance Association. It is also working on important regulatory reform that will allow the sale of micro insurance.