Agricultural loan risk shared

via CAAI

Monday, 14 February 2011 15:01 Jeremy Mullins and Soeun Say

The World Bank and the government have launched a multi-million-dollar programme to improve agri-businesses access to credit by guaranteeing a portion of bank lending to the sector.

Participating banks and microfinance institutions will have 50 percent of agricultural lending guaranteed by the government and World Bank Group. The partners expect to support up to US$50 million in financing to the sector, according to a press release.

“Improving financing in the agriculture sector is vital for sustained growth and future poverty reduction in Cambodia,” said World Bank country director Annette Dixon.

The World Bank claimed agriculture contributed about one-third of the Kingdom’s GDP, and employs some 70 percent of the population.

ANZ Royal Bank Chief Executive Officer Stephen Higgins wrote yesterday that the programme would make loans available to a wider array of people in Cambodia.

“The risk share scheme is particularly targeted at supporting borrowers who don’t have sufficient collateral to support normal lending,” he said.

ANZ Royal is presently negotiating the finer points of its agreement to participate in the programme with the International Finance Corporation, an arm of the World Bank Group, and hopes to finalise it soon, he said.

The bank has been pushing harder into agri-businesses worldwide, he said, adding he was “very optimistic” about the outlook for Cambodia.

“The supply of arable land globally is not increasing, but demand is, which means over time the price of agri products will continue to rise, and that will benefit agri producing nations like Cambodia,” he said.

Loran Import-Export Company president Lim Bun Heng yesterday said he welcomed attempts to improve credit access for the Kingdom’s agri-businesses, adding it would boost production in the sector. “This

will be a very strong point in motivating Cambodian agribusiness to push rice exports around the world,” he said. “We’ve been waiting for a long time [for increased access to credit].”

The Cambodian government has emphasised the potential for the agriculture sector in recent months, as the Kingdom’s rice harvest exceeded some expectations last year.

Yesterday, the United Nations Food and Agricultural Organisation revised upwards its projected rice exports for Cambodia – including unofficial cross-border flow – to 1.6 million tonnes for 2011, up from a projection of 1.4 million tonnes in its November update.

The FAO estimated Cambodia’s exports stood at 1.4 million tonnes in 2010. It also noted rice shipments directly to Europe recorded a substantial increase last year during in the first full year of the European Union’s Everything But Arms initiative. It also revised upwards its projection for rice produced last year to 8 million tonnes, from 7.3 million tonnes in November.

Ministry of Agriculture, Forestry and Fisheries secretary of state Chan Tong Yves declined to discuss risk share scheme yesterday, pending time to review the programme.