‘Number of MFI borrowers asking for loan restructuring has reduced’

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CMA executive director Phal Vandy. Supplied

Fewer cash-strapped micro loan borrowers who have been affected by the effects of the Covid-19 pandemic are seeking to delay their loan repayments, according to the Cambodia Microfinance Association (CMA).

CMA executive director Phal Vandy said the current trend is “a really good sign” that the impact of the outbreak on the economy is tapering off.

“CMA noted a sharp increase in loan restructuring requests in April and May, with 20,000 clients doing so every week, but this later declined to 10,000 in June and July. Over the past several weeks, there have been only around 1,000 requests per week.

“This is a really good sign that the impact of Covid-19 is declining and the economy is recovering.

“CMA is discussing with members and stakeholders to explore the possibility of extending loan restructuring into 2021 as some clients from the tourism sector remain significantly affected,” Vandy told The Post.

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MFIs have provided loans to some 2.1 million clients. Supplied

By September, more than 270,000 borrowers had requested loan restructuring from the 103 members of CMA.

A total of 260,000 requests, or 94 per cent, have been approved – with a staggering loan value of $1.27 billion, he added.

MFIs have provided loans worth $7.2 billion to 2.1 million clients, while 2.8 million depositors deposited $3.8 billion in the six microfinance deposit-take institutions in Cambodia.

During the Covid-19 outbreak, non-performing loans (NPL) in the microfinance sector spiked from 1.5 per cent to 2.5 per cent – rising in March and peaking in May – but gradually decreased in the following months.

In August, bad loans remained at 2.7 per cent in the MFI sector, while they stood at 2.3 per cent in the banking and finance sector.

However, the NPL rate is considered sustainable by global standards, according to association figures.

As in many other sectors, MFIs were not insulated during the pandemic and were burdened with rising operational costs and a decline in income as demand for loans dipped.

“On the bright side, the pandemic has been another test to show how resilient the financial sector in Cambodia is.

“During such hard times, MFIs were not only able to absorb the impacts and remain operational, but were also able to mobilise their resources to support their affected clients and communities,” said Vandy.

The association and its members took proactive action by preparing business revival strategies – including business contingency plans and business continuity plans – since January to navigate the financial crunch as the pandemic disrupted business operations.

“CMA members had been preparing for a much worse impact. All clients of CMA members who are affected by Covid-19 can request or will be asked to restructure their loans if they are unable to pay. CMA members believe that their real success is the success of their clients.

“CMA is proactively engaging with all its members, the National Bank of Cambodia and Credit Bureau Cambodia to monitor the credit market in real time to help the industry mitigate the economic impacts of the Covid-19 pandemic for all its clients. Liquidity among the top 10 MFIs remains strong, ” said Vandy.

the membership of CMA includes four banks, 76 MFIs, 11 financial leasing institutions and 12 rural credit operators.