New MFI to issue property loans

Photo by: TRACEY SHELTON
The construction sector has seen reduced activity and an increase in nonperforming loans since the economic crisis hit.

The Phnom Penh Post
http://www.phnompenhpost.com

Written by Nguon Sovan
Monday, 01 June 2009

First Finance – a joint venture with Phillip Capital Group of Singapore and private investors – says it will lend to the struggling property sector despite the continuing downturn and bad loans

WHILE most banks remain reluctant to provide real estate loans to customers amid the global financial downturn, a new microfinance institution set to launch June 8 says it will channel lending to house purchases and construction.

"For the first time, home financing will be available to middle- and lower-income Cambodians," Talmage Payne, CEO of newcomer First Finance, told the Post on Friday. "We are going to offer a product that the other [microfinance institutions] are not touching - loans for house purchasing."

First Finance is a joint venture between Phillip Capital Group and local individual investors. The Phillip Capital Group is a Singapore-based Asian financial house with operations in eight countries in the Asia-Pacific and Europe.

"We see largely younger Cambodians getting educations who really want to improve their lives. Many of them want to own their first home," he added.

He said First Finance will offer long-term repayment loans - up to 15 years - with a competitive interest rate. "The medium loan size is US$14,000, and clients will be required to use the title of the house or apartment they are buying as collateral."

The UN Development Programme said last month that more than 30 percent of construction projects "may have been placed on hold due to the global downturn", while analysts have blamed a rise in nonperforming loans this year on the faltering property market.

Payne said that despite the current downturn in real estate, First Finance had not been discouraged to invest.

"The Cambodian economy will come back soon, so we want to be ready," he said. "For those people that have the income and resources, it will be a good time to buy because it's cheaper due to the downturn period."

First Finance will expand to cities in Preah Sihanouk and Battambang provinces by 2010, said Payne.

Hout Ieng Tong, president of the Cambodia Microfinance Association and general manager of Hattha Kaksekar Limited, said Sunday that he welcomed the new institution.

"Most of the MFIs focus lending on small businesses rather than home buyers," he said, explaining that more customers benefitted from loans given to micro-, small- or medium-sized enterprises rather than individual real estate buyers.

He said that Hattha Kaksekar planned to lend $30 million this year, but would not issue property loans.

Bun Mony, a board member of the Cambodia Microfinance Association and general manager of Sathapana Limited, said Sunday this was a new market for MFIs.

"First Finance will be an evolutionary institution, and its focus on loans for house purchases reflects the progress of the real estate sector in Cambodia," he said.