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(17).
Micro-Finance
Section 3.1.5. Vulnerability,
under Food Security, the NPRS observes that “the poor are not able to access
the surpluses simply because they have low or no purchasing power, are often in
high debt burden, and lack access to adequate credit.”
Micro-Finance is specifically
discussed in more detail in Section 4.2. (Expanding Job Opportunities (4.2.5)).
In terms of the strategic role that micro-credit plays in poverty reduction and
rural development, the NPRS observes that “Credit is needed to replace exploitative
consumption loans covering household rice deficit and to facilitate and improve
rice production and yield by providing money for necessary productive, farm
inputs such as fertilizers and seeds. These loans will help provide food
security among poorer groups allowing more productive, sustainable farming.
Loans are also needed for income diversification through small-scale
enterprise/business activities and petty trades.”
In terms of policy “The
National Bank of Cambodia’s policy towards rural finance has been one of
support, in line with its concerns and responsibilities, for preserving the
integrity of the financial system, promoting public confidence, protecting
depositors, preventing fraud, and encouraging best management practices.”
The NPRS also observes that
“Micro finance institutions (MFI), NGOs and specialized banks have been
providing credit services to the needy in rural areas for some time. However,
the shortage of credit capital still remains between US$ 60-90 million to
respond effectively to the accumulated demand throughout the country.”
Relevant
Actions referred to in the NPRS include:
- “RDB is carrying out a feasibility study
on the credit needs of small and medium enterprises (SME) in Cambodia;”
- “…, the KFW (German Development Bank)
is willing to provide RDB through the MEF a financial grant of approximately
8 million DM for the SME scheme in Cambodia;”
- “RDB has provided credit to its partner
commercial bank to lend to their end-borrowers for supporting the pilot
projects of water supply in Takeo province.”
- “The World Bank (WB) has planned to
provide the investment capital as loan in the sectors of rural water supply
and electricity, as well as for local processing of agricultural
products;”
- “The MRD will provide
vocational training to rural people, especially women, and make possible the
effective use of credit to increase their income. Moreover, the MRD will
cooperate and coordinate with the Rural Development Bank, relevant
institutions, external agencies and NGOs to promote small businesses.”
The
NPRS also notes “micro credit schemes based in communities and run by women for women
have proved very successful both in Cambodia and other countries. The default
rate is very low and the cushion these schemes provide in times of emergency are
often essential in saving family assets. In addition, they can be the basis for
small income generating activities, which often provide the only cash available
to families living at subsistence level. The only constraint on their further
expansion is the credit capital and the mechanism to ensure that this capital is
placed in the hands of women. This model will be explored and
expanded where appropriate.”
In the Annex 3 Matrix, under
Micro-Finance (2.5), the NPRS lists two strategic objectives:
- “Pro-poor rural finance system and facilities that
provide affordable financial service to poor in order to enhance rural
incomes and reduce poverty.” This will be done by “developing a system
to support and supervise MFIs, introduce prudential norms for licensed MFIs,
and strengthening the Rural development Bank, improving the capacity to
support licensed MFIs, and enhance off-site and on-sire supervision for
rural finance.” Progress will be indicated by the number of staff trained
and the availability of reports.
- “Promote rural econ development with investment
credit for SMEs, to expand rural employment & income opportunity.” The
first step appears to be to “conduct assessment of micro-finance needs of
villagers and rural entrepreneurs for micro-finance in 15 provinces by 2005.
There is no reference to
Micro-Finance in Section 6.1. (Indicators and Targets).
NGO
Action:
According to the NGO CG
Statement, “Reliable access to micro-credit and savings services by the poor
is one crucial component for alleviating poverty and accelerating economic
growth in Cambodia.”
- Monitor procedures, policies, and activities
relative to MFI support and supervision, including licensing;
- Seek clarification concerning the feasibility study
of SME credit needs assessment referred to above (e.g., will it be a
consultative process involving NGOs, (given NGO experience in micro-finance,
including self-help groups and MFIs)?), and participate as appropriate;
- Seek clarification regarding the role NGOs can play
in exploring and expanding the model of small-scale community credit
involving women. (This is especially important given the fact that such
schemes require considerable preparation at the community level, and are
often poor candidates for rapid, large-scale replication);
- Seek clarification concerning the reference to a
World Bank loan for rural water supply, and comment as appropriate;
- Advocate around the issue of land collateral,
especially in the context of the relationship between unproductive
(“non-performing”) loans and default on leading to land seizures, with
special attention to impact on the rural poor;
- Monitor women’s access to affordable credit
(including single women heads of household);
- Monitor resource mobilization (among public sector
and donors) and allocation, as well as disbursements of such finds.
- Develop more relevant and useful indicators and
targets for assessing poverty impact from micro-finance.
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