October 26, 2011

Floods to push up non-performing loans in 4th quarter


The worst floods in a decade may boost the number of nonperforming loans in the Kingdom’s microfinance industry in the fourth quarter, insiders said yesterday.

However, those insiders said the damage done to Cambodia’s agriculture sector would not have a significant impact given the MFIs’ diversified portfolio of loans.

The non-performing loan rate climbed just 0.14 per cent year-on-year between July and September to 1.24 per cent, according to the Cambodian Microfinance Association, even though seasonal flooding in the latter month has since destroyed crops and caused more than 200 deaths.

Non-performing loans grew US$1.94 million quarter-to-quarter to a total of $10.1 million, according to CMA figures. Total loans rose 10 per cent to US$815.5 million in the third quarter, including ACLEDA Bank, while deposits rose 5.4 per cent to $1.17 billion.

CMA Chairman Chea Phalarin noted the NPL rate would climb into the final months of the year as a result of the flooding, though he declined to offer an exact figure. But he also estimated that loan demand would rise as those floods receded. “We had a very good performance [in the third quarter], although we got a bit of pressure from the floods, which can slow operations in some areas. But we still did well in both loans and saving,” he said. 

A United Nations report issued last week claimed 9 per cent of Cambodia’s rice crop had been destroyed, with another 16 per cent listed as at risk. At the same time, new media reports have cited government officials who said as much as 26 per cent of the Kingdom’s total cassava output has been either damaged or destroyed.

Chea Phalarin said about 50 per cent of total loans outstanding went to the agriculture sector. Still, he emphasised that MFI loans were not concentrated among the hardest-hit paddy farmers, but were diversified among different crops.

He also said MFIs were prepared for the seasonal flooding, and that clients should be able to find other sources of income in order to pay back their loans.

“One important thing is that all the MFIs have their own policy to monitor risk and deal with it. We do agree that we will be impacted a bit, but it won’t make the whole industry worse,” he said.

Chea Phalarin also serves as president of Amret Microfinance, which he said saw total loans outstanding reach $88 million in the third quarter from $75 million in Q2. Deposits, meanwhile, rose to $31 million from $28 million, sequentially.

Prasac MFI, the Kingdom’s biggest microfinance lender, claimed a 45.9 per cent year-on-year increase in loans outstanding for the first nine months of 2011 to $133.4 million, with deposits climbing 472.9 per cent to $3.5 million. Non-performing loans decreased to 0.16 per cent of the total portfolio, down from 1.14 per cent the year before.

“I think the flooding will not affect much of our portfolio quality because our portfolio is diversified in terms of geographic area, business sector and clients,” said Prasac MFI CEO and president Sim Senacheert.

National Bank of Cambodia director general and spokeswoman Ngoun Sokha said previously she did not expect the floods to dramatically impact the Kingdom’s MFIs.

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