Microfinance and Rural Development in Cambodia

MICROFINANCEAND

RURAL DEVELOPMENT IN CAMBODIA

-------------About the Authors--------------------------------------------------------

Dr. Dy Davuth is currently holding the position of Vice RectorAcademic in Build Bright University, Phnom Penh, Cambodia. He hasbeen awarded Doctor of Philosophy in Business Administration fromRutherford University (USA) in 2005. His fields of Specialization areMicrofinance, Financial Management and Corporate Finance. He hasalso participated and contributed papers in various national andinternational conferences/seminars. Presently he is a member ofBoard of Directors and Chairman of Audit Committee ofHATTHA KAKSEKAR, a leading Microfinance Institution in Cambodia.Earlier he has worked as Administrative and Finance Manager withAMRET for nearly six years.

Dr. Tapas R. Dash is presently serving at Build Bright University,Phnom Penh, Cambodia as Professor and also holding the position ofDirector, Post-Graduate studies. Prior to joining this University, he hadserved in a National Institute (ICM, NCCT) in India funded by CentralGovernment and having more than 17 years of experience in teaching,training, research and consultancy. He has been awarded Doctor ofPhilosophy (Ph.D.) in Applied Economics from Utkal University (India)in 1994. His areas of interest include Rural Economics, ProjectManagement, Economics of Education, Managerial Economics andInternational Business. Dr. Dash has to his credit more than a dozenof articles/research papers published in national and internationaljournals. Also he has participated and contributed papers in variousnational and international conferences and seminars.

MICROFINANCEAND

RURAL DEVELOPMENT IN CAMBODIA

Dy DavuthTapas R. Dash

Build Bright University PublicationsPhnom Penh

Cambodia

No part of this book may be reproduced, stored in a retrieval system,or transmitted in any form or by any means, electronic, mechanicalphotocopying, recording or otherwise, without the prior writtenpermission from the authors.

Microfinance and Rural Development in CambodiaFirst Edition 2006© AuthorsAll rights reserved

ISBN 99950-846-0-0

Printed in Cambodia

Published by:Build Bright University Publications,Phnom Penh, Cambodia

Dedicated to our revered parentsfor their

Constant Inspiration, Guidance and Support

Preface

Microfinance as commonly known refers to the provision of financialservices, such as credit, saving and other assistances to supportself-employment of the poor. The delivery of microfinance has beenconsidered as an approach towards economic development ultimatelyto provide larger benefits to the people belonging to low-income group.As credit is considered as a vital input for the growth of any activity, theprovision of micro credit as a part of microfinance activity is a crucialmechanism for the overall development of the community. Thus,Microfinance Institutions (MFIs) have been playing a pivotal role in thesocio-economic upliftment of the Cambodians at large.

Microfinance sector has been developed since the early 1990s,driven by donors funding credit operations. Though someorganizations have successfully transformed and obtained licenses asspecialized banks or MFIs, to-day the process of transformation posesa major challenge for most non-government organizations (NGOs) interms of upgrading organizations, systems and human resources. Tomeet the present challenges, MFIs need to develop a consistentcorporate strategy as well as an effective business plan. Further, tomake the organizations more effective, the National Bank of Cambodia(NBC) has been issuing proper regulations from time to time in thelight of the changing environment. Thus to-day, to ensure a healthymicrofinance environment, the role played by the government, theNational Bank of Cambodia (NBC), Rural Development Bank (RDB)and other apex institutions are praiseworthy. Besides, the donorcommunity has been influential both in the design as well as the paceof development of microfinance sector.

The dependence on moneylenders for certain types of financialneeds has been reduced since the creation of Self-help Groups(SHGs) in certain provinces. Further, the availability of commercialmicrofinance through institutions significantly has marginalized themoneylenders power of credit supply to the low-income borrowers.Complete elimination of informal with institutional finance is expectedto improve the income levels of the poor in the near future.

To-day, microfinance operators are providing individual loans andgroup loans to people as well as small business enterprises in bothrural and urban areas. Over the years, they have modified their

operational methodology to make themselves more vibrant andeffective. However, sustainability is the key component formicrofinance operators in terms of their independence for subsidiesand sustainable returns on average assets. Though a lot of difficultiesare being faced by MFIs in their operations but as a matter ofsocio-economic commitment, their role is well recognized. Thus, as asocio-economic institution, the role played by MFIs in economicdevelopment of Cambodia is quite appreciated.

To seek answer to the issues like what extent the credit supplied byMFIs has helped to increase the standard of living of the beneficiaries,and to examine the role played by the MFIs in reducing poverty ingeneral and of beneficiaries in particular in Cambodian context thepresent study was undertaken.

It is our pleasure to express our appreciation to those who haveinfluenced this work. We are grateful to Dr. In Viracheat, Rector, BuildBright University, Cambodia for his continuous encouragement andsupport. We are also indebted to our other colleagues for their supportand, particularly, Dr. M.R. Behera, Professor, Build Bright University foroffering his valuable suggestions and comments for improving thedraft of the work. We are also thankful to Seang Sok Rotha for histechnical assistance in carrying out the present work.

During the research work, we have visited a number ofInstitutions/Organizations, such as the National Bank of Cambodia,Rural Development Bank, a large number of MFIs, etc. Weimmensely acknowledge the helps rendered by these organizations insupporting us with necessary information. Further, we wish to place onrecord the cooperations received from the respondents, whoresponded patiently with keen interest, for long hours, the tedious andintricate schedules.

Last but not the least, we are thankful to our family members whohave always been a source of inspiration and without theircooperation, the publication of this work would not have taken place.

Finally, we alone are responsible for any deficiency.

Dy DavuthTapas R. Dash

viii

Contents

Preface viiList of Tables xiList of Abbreviations xiii

1. Introduction 1-12

2 Institutionalization of Finance 13-28

3. Cambodian Banking System and Microfinance 29-49Operators

4 Microfinance and Beneficiaries 51-78

5. Summary and Conclusion 79-86

Appendix 87-109

References 101-118

List of Tables

2.1 Growth of MFIs During 1999-2005 193.1 Financial Highlights of ACLEDA During 2003-2004 353.2 Financial Highlights of AMRET During 2003-2004 383.3 Financial and Operational Highlights of AMK During

2003-2004 494.1 Distribution of Households on the basis of the Number

of Years of Business 524.2 Distribution of Households on the basis of type of

Business 544.3 Comparative Results of Investment in Equipment

between Beneficiariesand Non-Beneficiaries 614.4 Comparative Results of Expenditure on Improving

House between Beneficiaries and Non-Beneficiaries 634.5 Comparative Results of Educational Expenses between

Beneficiaries and Non-Beneficiaries 59 4.6 Comparative Results of Food Expenses between

Beneficiaries and Non-Beneficiaries 654.7 Comparative Results of Health Expenses between

Beneficiaries and Non-Beneficiaries 664.8 Comparative Results of Saving between Beneficiaries and

Non-Beneficiaries 674.9 Comparative Results of Expenses on Ceremony between

Beneficiaries and Non-Beneficiaries 684.10 Comparative Results of Daily Cash Flow between

Beneficiaries and Non-Beneficiaries 694.11 Comparative Results of Revenues between Beneficiaries

and Non-Beneficiaries 704.12 Comparative Results of Investment between Beneficiaries

and Non-Beneficiaries 714.13 Comparative Results of Investment in House Equipment

between Beneficiaries and Non-Beneficiaries 724.14 Distribution of Income of Beneficiaries Before and

After the Loan 734.15 Distribution of Expenditure of Beneficiaries Before and

After the Loan 744.16 Distribution of Asset Position of Beneficiaries Before

and After the Loan 754.17 Distribution of Daily Cash Flow of Beneficiaries

Before and After the Loan 76

List of Abbreviations

ACLEDA : Association of Cambodian Local Economic Development Agencies

ADB : Asian Development BankCCB : Cambodia Community BuildingCCRD : Credit Committee for Rural DevelopmentCDC : Cambodia Development CouncilCEB : Cambodian Entrepreneur BuildingCEDAC : Centre d’Etude et Development Agricole CambodgienCFD : Agent France DevelopmentCGAP : The Consultative Group to Assist the Poorest CRS : Catholic Relief ServicesDEG : Deutsche Investitions und Entwicklungsgesellscaft mbHEMT : Ennatien Moulethan TchonebatFMO : Netherlands Development Finance Company GRET : Group de Recherches et d’Echange TechnologiquesGTZ : German Development CooperationIFAD : International Fund for Agricultural DevelopmentIFC : The International Finance CorporationILO : International Labor OrganizationIRAM : Institute de Recherche et d’Application des Méthodes de

Dévelopment KWF : German Bank for ReconstructionMFI : Microfinance InstitutionNBC : National Bank of CambodiaNGO : Non Governmental OrganizationPCA : PRASAC Credit AssociationPRASAC : Support Programme for the Agricultural Sector in

Cambodia RDB : Rural Development BankRGC : Royal Government of CambodiaSHG : Self Help GroupsUNDP : United Nations Development ProgrammeUSAID : United States Agent for International DevelopmentVDC : Village Development Committees

I

Introduction

Agriculture is the foundation of our national economy. Being anagrarian economy, in the context of Cambodia, the importance ofmicrofinance needs no more explanation. Its role towardsstrengthening rural economy is enormous. Microfinance Institutions(MFIs) have been playing a pivotal role in the socio-economic uplift-ment of the poor Cambodians. Thus, they have been playing a majorrole in the economic development of Cambodia. To be broad-based,the MFIs need to gear up their activities by identifying the areas of theirstrengths and weaknesses.

Microfinance has been widely used in a development context in thethird-world nations and less developed countries to help the poor inimproving their standard of living. It has been playing a vital role ineconomic development, especially in rural areas. Cambodian Prakason Registration and Licensing of Microfinance Institution (2000), states“Micro-finance is the delivery of financial services, such as loans anddeposits to the poor and low-income households and micro-enterprises”. Its delivery has envolved as an economic developmentapproach intended to benefit low-income women and men. In addition,it also refers to small-scale financial services for both credits anddeposits, meant for people engaged in farming, fishing, operatingsmall or micro-enterprises, providing other services on wage basis,renting out a small amount of land, vehicles, animals or machinery andtools, in both rural and urban areas. Thus it gives access toentrepreneurs, to the financial services, such as credit and depositwith reasonable interest rate.

Micro-credit in terms of loan size varied from organization toorganization, hence it has no agreed definition. Micro financing hasbeen an effective tool to do with the persistence of rural poverty and

concomitant unemployment, which has been a major concern inalleviating poverty. Consultative Group to Assist the Poor (CGAP)stated that micro-finance is meant for providing poor individual andhouseholds with small loans (micro credit) that are repaid within ashort period of time in order to help them engage in productiveactivities or grow their tiny businesses. Capital is not the only factorthat allows the growth or creation of enterprises, but it is also vital, aswithout it, creativity, drive, and innovation cannot be transformed intomaterial actions.

Micro-finance refers to the provision of financial services, whichinclude credit, saving and other assistance to support self-employmentof the poor. Micro-finance is distinguished from micro credit in a sensethat micro-finance refers to the provision of full financial servicesincluded but not limited to the provision of micro credit.Micro-enterprises are enterprises performed by family members andsome hired laborers and income generated is used for familyconsumption and reinvestment.

Transformation lending is designed to bridge the gap betweeninformal sector and micro-enterprise lending programs and formalbanking sectors. Wholesale lending is defined as providing loans toinstitutions that lend or retail funds to end-borrowers. The corebusiness of the Rural Development Bank (RDB) is wholesale lendingby providing credit funds to program partners for significantlyincreasing outreach to target clientele and contribute to efforts ofnational government in alleviating poverty. Wholesale lending is theprocess of lending of RDB to MFIs that retail funds directly toend-borrowers or on-lends funds to other MFIs that retail fundsdirectly to end-borrowers. Micro-finance Institutions (MFIs) refer toinstitutions engaging in the delivery of micro-finance services. Theygenerally refer to the retailers of micro-credit or those directly dealingwith end borrowers. Moreover, micro-finance vision is a viable andsustainable private micro-financial market, with the governmentproviding a supportive and appropriate institutional framework to themarket.

2 Microfinance and Rural Development in Cambodia

Micro-finance: Cambodian Experience

Cambodia is one of the developing countries in the region, coveringa surface of 181,035 Km2 with a total population around 14 million,equivalent to 2,188,633 households. Eighty-five percent of thepopulation lives in rural areas where farming, fishing and traditionalcrafts are the daily business activities.

Cambodian economy has changed from a planned economy to afree market economy since 1989, when Vietnam withdrew its troopsfrom Cambodia. The micro-finance system in Cambodia was createdwith the help of micro credit promoters and international donors at thebeginning of the 1990s. The demand for micro credit in Cambodia islargely untapped and the government has strongly encouraged thedevelopment of the sector. After the general elections in 1993,Cambodia has become an internationally recognized government;additional foreign support has been available, and a number ofmicro-finance providers have emerged. The number of (national andinternational) organizations providing micro credit has increasedyearly ever since. The Royal Government of Cambodia (RGC) hasclearly recognized that providing small loans or savings (micro creditor saving) to poor citizens is a vital mechanism to the development ofrural areas (community development). In this connection, rural creditservices have been provided actively and directly to poor citizensthroughout the country. Although this is a new sector (industry)for Cambodia, the process is being improved and is growing quicklywith the active support of the Royal Government of Cambodia.

In 1990, the country was partially in peace. The demand for creditfrom that time has really been increased. People have become muchmore positive and hopeful in their future and consumer demands havegone up. For example, before 1990, sellers could sell only 5 chickensa day, but now they can sell more than 20 chickens a day. This showedthat people want large amount of loan to expand their businesses.Now, for the first time, they have really started planning for their futureand there is a positive outlook; such feelings of optimism breedsuccess and increase demands for our microfinance services. Many

Introduction 3

NGOs and international organizations operated in the 1990s, althoughthere was no legal framework for microfinance until 2000. This did nothamper the growth of such semi-formal microfinance. As a result, the1990s showed some key developments in terms of the legal andpolitical environment for microfinance. A major milestone for thedevelopment of the microfinance sector in Cambodia was planted inJanuary 2000 with the law (Prakas) on the establishment ofMicrofinance Institutions (MFIs). The new law allows formal MFIs to beestablished as private companies with a minimum capital of only US$65,000. The National Bank of Cambodia (NBC) for the first time in2000, issued regulations on the classification of MFIs into threecategories according to the level of their operations, and createdcriteria for licensing and registration. These regulations include criteriafor licensing and registration; minimum capital requirement; solvencyratio; liquidity ratio; uniform chart of accounts; reporting requirements;and interest calculation (NBC, 2006). These regulations are consistentwith the scope of work of the MFIs and support them in expanding theiractivities under an appropriate umbrella. Thus this has madeCambodia to the forefront of a progressive microfinance regulator inAsia.

The Royal Government of Cambodia has given top priority to itssocial development programs for poverty alleviation in rural areas.This is further to develop the living standards of Cambodians.Realizing the fact, the government strongly encourages thedevelopment of microfinance sector as machinery towards achievingthe socio-economic objectives. At present, there are more than onehundred rural financial operators, including licensed MicrofinanceInstitutions, registered and non-registered Non-GovernmentalOrganizations in which most of them are in small size. By the end of2005, there were 16 licensed MFIs and 24 registered as rural creditoperators. Among those institutions, the majority of them weretransformed from NGOs, while others were local private companies.By September 2005, licensed MFIs accumulated a total loanoutstanding of KHR 190 billion (excluding loans of ACLEDA tomicrofinance sector) with 371,000 borrowers and has a total deposit ofKHR 9.4 billion, which equals to 5 percent of loan outstanding (NBC,


2006). Thus the microfinance operations (Non-GovernmentalOrganizations and Microfinance Institutions) are spreadingcountrywide across all the 24 provinces. The biggest Specialized Bankis ACLEDA, which has a total loan outstanding of USD 64.9 million atthe end of 2004 and presently operational in 21 provinces (ACLEDA,2004). The Rural Development Bank (RDB) being a national institutionwas established to promote microfinance in early 1998. It hasassigned the task of coordinating finance and refinancing to allMicrofinance Institutions, Specialized Banks and Commercial Banks,which have the intention to support rural economic activities. Parallelto this, the National Bank of Cambodia (NBC) has enacted a Law onBanking and Institutions, to govern and license MicrofinanceInstitutions. This law has been created to provide opportunities toNational and International Financial Organizations and Micro CreditProviders, to undertake microfinance activities as well as to linkmicrofinance activities to the formal banking system. Despite thissystematic and coordinated effort, the credit needs of the rural poorare not being met. There is a shortage of up to USD 120 million incredit available to this sector (Chandarot, 2002). The needs of the ruralpoor can only be addressed if either the present institutions are ableto access additional finance, or new institutions begin to provide microcredit. Ennatien Moulethan Tchonnebat (EMT), now the largestMicrofinance Institution in the country by the number of customers(105,283 by the end of 2004) and presently known as AMRET, wasestablished in 1991 as a GRET project in order to providemicro-credit to the poor rural people in Cambodia. In July 2000,Ennatien Moulethan Tchonnebat (EMT) was registered as a privatelimited company with a share capital of KHR 330 million and inNovember 2000, it (EMT) mad a request to the National Bank ofCambodia to obtain license of Microfinance Institution and obtainedthe same in 2001.

Thus so far the socio-economic development of Cambodia isconcerned, the Microfinance Institutions (MFIs) are playing a pivotalrole in the country. Against this backdrop, the present study hasfocused on the role of Microfinance Institutions in promoting ruraldevelopment in general and in strengthening the rural credit system in

Introduction 5

particular. Further, the study has examined the impact of creditsupplied by Microfinance Institutions on the standard of living of thepeople and thereby in reducing the rural poverty in general andbeneficiaries in particular.

Importance of the Study

In the present scenario, micro-finance plays a crucial role ineconomic development of Cambodia. The role played by MFIs instrengthening the rural economy through the provision ofmicro-finance services to the rural poor is noteworthy. To understandthe positive contribution made by the MFIs on the standard of living ofthe beneficiaries and thereby in reducing the poverty, the presentstudy has been undertaken. The results of the study certainly help theplanners, policy makers in the government as well as the NGOs andMFIs to design appropriate strategies for the development of thissector.

Objectives of the Study

Considering the crucial role played by the MFIs in the socio-economic development of the country, an attempt is made in thepresent study with the following objectives in mind.

(i) To assess the impact of credit supplied by MicrofinanceInstitutions on the standard of living of beneficiaries.

(ii) To examine the role of Microfinance Institutions in reducing ruralpoverty in general and beneficiaries in particular.

Hypotheses of the Study

With reference to the above objectives, the present study has takeninto account the following hypotheses for testing.

Ho 1: There is no statistically significant difference in the cash flowbetween the development loan members and the control group


members.

Ho 2: There is no statistically significant difference in the total incomebetween the development loan members and the control groupmembers.

Ho 3: There is no statistically significant difference in the levelof expenditure between the development loan members andthe control group members.

Ho 4: There is no statistically significant difference in the value of theasset position between the development loan members andthe control group members.

Ho 5: There is no statistically significant difference in the value of theasset position, expenditure, cash flow and income within thedevelopment loan members before and after the loan; and nostatistically significant difference between development loanmembers and the control group members.

Methodology

Sample Design

The study has been conducted in two provinces in Cambodia, i.e., Kompong Speu and Kompong Chhnang. The selection of these twoprovinces has been made out of 21 provinces of the country whereMFIs are operating on the basis of their levels of development. WhileKompong Speu is considered as a backward province, KompongChhnang is positioned as an average province. In Kompong Speu andKompong Chhnang provinces the number of loans to householdsduring the years 2000 to 2004 numbered 191 and 62 respectively. InKompong Speu alone, 83 households received one year loans,whereas in Kompong Chhnang, 51 households received one yearloans. All beneficiaries of these one year loans have been consideredas the treatment group selected for the purpose of the study. An equal

Introduction 7

number of control group members, who did not receive loans fromEnnatien Moulethan Tchonnebat (EMT) or any other Micro FinanceInstitutions (MFIs), have been selected from these two provinces forthe purpose of the study and the treatment group members(beneficiaries) have selected the control group members (non-bene ficiaries). After completion of the personal interview with thetreatment group member, that member has been asked to recommenda neighbor or friend, who is as close as possible to the treatmentmember in type and size of business, and family composition that didnot receive a loan. There after, this recommended control groupmember has been administered with the personal interview. In casethe selected control group member refused to supply information, theinterviewer has asked the original treatment member to provide thename of another person that is as close as possible to the treatmentmember in type and size of business, and family composition that didnot receive a loan to replace the first recommended control groupmember. Thus while the study has selected all beneficiaries of oneyear loans of EMT in the two provinces, the selection of non-beneficiaries have been done on the basis of purposive sampling.

Sources of Data and Collection Procedures

The study is based on both the secondary and primary data. Thesecondary data are collected from various sources, such as selectedMicrofinance Institutions (MFIs), National Bank of Cambodia (NBC),Rural Development Bank (RDB) and several Publications of AsianDevelopment Bank (ADB), etc.

For the purpose of collection of primary data a structurequestionnaire has been administered using personal interviews(Appendix A). However, before the finalization of the questionnaire thesame has been tested twice utilizing a pilot survey in Kandal Provincenear the capital city of Cambodia with ten treatment members(beneficiaries) and ten control group numbers (non-beneficiaries). Anyquestions or misunderstandings by the test subjects have beenrecorded in order to revise the final draft of the questionnaire beforebeing administered to the actual control and treatment members in the


study. The questionnaire consisted of questions on several personalcharacteristics of both the treatment and control group members. Thequestionnaire also included several questions relating to the income,asset position, the amount of expenditure made on education, food,health care, ceremony, purchase of gold or saving of the treatmentmembers before and after availing the loan from MicrofinanceInstitution and of control group members for a similar period of time.Further, it included questions on the amount of investment made onequipment for business, improvement of house, creation of householdassets, besides, questions relating to business cash flow, incomegenerated from business have been included.

Statistical Tools

After the collection of data, the same are computed and tabulatedkeeping the objectives of the study in mind. The interrelationshipamong the data has been formed as the basis for tabulation.

In order to measure the significance of the change on severalaspects, such as income, expenditure on various activities, assetpositions and cash flow, between the beneficiaries and non-beneficiaries, the ‘t’ test has been used.

The formula for calculating the ‘t’ value has been given below:

Where,

X1 = mean of the first sample.

X2 = mean of the second sample.

n1 = number of observation in the first sample.

Introduction 9

n2 = number of observation in the second sample.

S = combined Standard Deviation

The value of S has been calculated as follows:

S =

When comparing between the beneficiaries and thenon-beneficiaries, the first sample was the beneficiaries (treatmentmembers) and the second was the non-beneficiaries (control mem-bers).

In order to measure the significance of change in the distribution ofincome, expenditure, asset position and cash flow of the beneficiariesbefore and after availing the loan, i.e. the development loan membersbefore and after 12 months of availing the loan, the chi-square test hasbeen used.

The formula for calculating of the Chi-square value (x2) has beengiven as follows:

Where:i = number of class in the distributionOi = observed frequencies in class iEi = expected frequencies in class iC = number of categories df = C - 1

Furthermore, in order to judge the statistical significance betweentwo groups, the research has worked out the Multiple DiscriminantAnalysis, which happened to be a generalized distance between


Introduction 11

beneficiary and non-beneficiary, where each group has beencharacterized by some set of equipment for business, improvinghouses, education expense, food expense, health expense, saving,revenue, ceremony expense, cash flow per day, investment and houseequipment variable, and where it has been assumed that discriminantcoefficient structure was identical for both groups. It has been workedout with the help or the following:

D = b1X1i + b2X2i + ….….. + bnXni

Where,Da = ith applicant’s discriminant scorebn = discriminant coefficient for the nth variableXni = applicant’s value on the nth independent variable

Limitations of the Study

The study has the following limitations:

(i) As already mentioned, the study has been undertaken in twoprovinces of Cambodia, i.e., in Kompong Speu and KompongChhnang out of a total of 21 provinces where MFIs are operating.Thus the geographical coverage of the study is quite limited.

(ii) To assess the impact of credit supplied by MFIs on the standard ofliving of the beneficiaries, only the beneficiaries of one MFI,namely EMT (AMRET) have been taken into account.

(iii)The study has selected the beneficiaries in both the provinces whohave availed one-year loan during the period 2000 to 2004.Thus the sample size of the study is also quite limited.

However, keeping the purpose, efforts, time, availability of data andseveral constraints in mind, the present study is a modest attempt inits desired direction.


Plan of the Study

The present study consists of five chapters. The first chapterintroduces the subject matter, examines the justification of the studyand discusses the objectives and methodology adopted in the study. Itthus serves as a prologue. The second chapter explains theimportance of institutionalization of finance in the context ofCambodian economy. Further, the role played by the Government andRural Development Bank are analyzed in this chapter. The thirdchapter highlights the cases of some major microfinance operators inthe country along with their achievements. In the fourth chapter, theimpact of micro credit on the standard of living of the beneficiaries isanalyzed. Further, this chapter makes a comparative analysis betweenbeneficiaries and non-beneficiaries to understand the impact of microcredit on their income, expenditure, cash flow, asset position, etc. Thelast chapter summarizes the main findings of the study policyrecommendations along with its conclusion. The study is appendedwith supplementary information sheets used for data analysis andpresentation.

II

Institutionalization of Finance

The basic function of credit, whether provided by formal or byinformal sources, is to enable individuals and business enterprises topurchase goods and services ahead of their ability to pay. Demand forcredit arises because of the time-consuming nature of the productiveand distributive process-consumers demand, credit to acquire goodsin advance for which payment can be done in future. Thus the gapbetween production, consumption and configurations give scope forthe wide use of credit. Savings accommodates demand for credit, butthe demand for credit for production purposes outstrips savings andthus, the necessity for additional funds crops up from financialinstitutions. Further, with the process of development of the economy,while the importance of informal sector has been reducing, the growthof formal sector takes place.

The credit for several purposes particularly, in rural sector inCambodia is provided by both organized and unorganized agencies.The organized agencies constitute of Institutions/organizationscommitted towards the development of the beneficiaries by supplyingtimely credit with a reasonable interest rate. The unorganizedagencies consist of professional money-lenders, traders, relatives andfriends and others. They freely supply credit for both productive andunproductive purposes, besides their methods of undertaking creditbusiness are simple and elastic but involved a lot of shortcomings.Normally, they charge very high interest rates and the detailedpractices on the basis of which they supply credit to the needyborrowers remain unclear to them. In fact, they commit manymalpractices, which are very well known. These unorganized agenciesnever care for the purpose for which the loans are used and hence,usually these borrowings go into unproductive channels. Therefore,these sources cannot be assigned any definite role for the socio-eco-nomic development of the economy in general and rural sectorin particular.

Informal Credit: Cambodian Experience

In the context of our economy, several moneylenders can be foundin both developed and open villages. Their interest rates normally varyfrom 1 to 10 percent per month and even up to 20 percent dependingon the situation. With limited access to financial services in rural areas,most people have relied on moneylenders for investment capital tofinance essential inputs for agricultural production and microenterprises. Thus, almost everyone uses this kind of credit to do theirbusinesses for a short time. Though villagers prefer to borrow moneyfrom moneylender sources because they can get it quickly, but indebtedness to moneylenders is the first cause of bankruptcy amonghouseholds.

Usually, it is seen that informal lending results in two different types:commercial (loans from moneylenders, traders, employers,commodity wholesalers, and landlords) and non-commercial (loansfrom friends, relatives, neighbors, and some forms of rotating savingand credit association). Non-commercial loans are common andusually carry no or low financial interest for small amount and shortterms for emergencies or for special occasions and specific purposes,such as purchase of land, weddings, house construction for youngcouple, etc. Informal commercial lenders, however, typically providecredit that can be used for both production and consumptionpurposes with a high interest rate.

As revealed from 1996 socio-economic survey in Cambodia, duringthe year 1994-95, approximately 704,000 rural households availedloans amounting to about USD 120 million. While 54,000 of themobtained loans from traders, the moneylenders provided support to114,000 people. The highest 400,000 availed services from therelatives and 114,000 from friends and neighbors. Of the remaining,only 71,000 got the support from NGOs and lowest 7,000 from banks(NBC, 2006).

Informal lenders are considered as a major cause of poverty in thecontext of our economy. Their interest rates charged are spectrums


ranging from zero interest to a very high rate of interest, such as 360percent per annum. Despite the prevalence of high interest rates,borrowers continue to demand for informal services due to severalreasons, such as ease of loans, flexibility in repayments, personalrelationship, and lack of alternatives to access to formal services. Thustheir elimination is considered necessary for the alleviation ofpoverty. In this situation, the replacement of informal finance with insti-tutional finance at lower cost is expected to improve income levels ofthe poor both in rural as well as in urban areas.

If the provision of credit is not available from either an NGO or oneof the alternative credit programs, farmers are forced to finance inputsby themselves. If they cannot afford the inputs by borrowing from othersources (friends/relatives, traders or moneylenders) often at arelatively high interest rates, the result is either a reduction in income– the considerable amount of interest that has to be paid on the loanor a reduction in self-sufficiency due to lower yields.

Reducing the role of moneylenders with credit scheme frommicrofinance operators is evenly spread throughout various categoriesof families and also pushes down the rate used by moneylenders. Itsimpact, therefore, lies in the saving generated when it takes the placeof the loan from a moneylender or supplier and, to a lesser extent, inthe lesser social dependency when it replaces a family loan. However,there may be reasons that people do not want to borrow money fromthe lender sources because they charge high interest rates, and theirstrict payment conditions make small businesses difficult to access theloan from those sources.

The creation of the Self-help Groups (SHGs) in a few provinces hasreduced the dependence on moneylenders for certain types offinancial needs. But through the number of loans from MFIs and NGOshas expanded considerably, loans from informal sources, such asmoneylenders, relatives and friends continue to be an importantsource of rural credit. People used to buy materials for their incomegenerating activities on credit from moneylenders, which they couldnot even bargain over the price. They generated less income, but after

Institutionalization of Finance 15

they received the credit they improve their income. The crucial point isthat lower-income borrowers who borrow from moneylendersgenerally pay much higher interest rates for credit, hence, it isnecessary if commercial microfinance is widely available throughinstitutions. This is of particular significance because the higher ratesof informal lenders tend to constrain the growth of micro-enterprises,and also the volume of informal commercial credit is very large.

Formal Credit: MFIs and Process of Transformation

Organized institutions have an intimate knowledge of people withwhom they have to deal with. The MFIs are specially meant for those(farmers and others) with small means. With the establishment ofRural Development Bank (RDB), the help and guidance to theseinstitutions have been enlarged and become more specialized. TheRural Development Bank plays a leading role to negotiate with donorcountries and international aid organizations to attract funding andassistance in order to finance and refinance rural lending operatorswith the sole intention of supporting and strengthening rural economicactivities.

The microfinance sector has developed since the early 1990s,driven by donors funding credit operations. In order to transform NGOsinto registered and licensed MFIs, the National Bank of Cambodia(NBC) in 2000 started to provide revised regulations and as a result,by the end of 2005, there were 16 licensed MFIs and 24 registered asrural credit operators. Certain organizations, such as ACLEDA, EMT(AMRET), Hattha Kaksekar, PRASAC, CEB, AMK, etc. have alreadysuccessfully transformed and obtained licenses as specialized banksor MFIs. The transformation process has posed a major challenge formost NGOs in terms of upgrading organizations, systems and humanresources. It required the MFIs to develop a consistent corporatestrategy and business plan. The transformation has also opened newopportunities, as transformed and licensed MFIs are permitted to offerdeposit facilities and mobilize public savings. An institution, i.e., astructure or form, through the operation of laws or regulations, hasofficially been given the institutionalization of a decentralized finance


scheme. The institutionalization is the assumption of responsibility forschemes by local nationals. In most cases, external support keepsthem in a situation of dependency. This requires official recognition,which starts with the adoption of legal constitution and continuesthrough accommodation under banking regulation by various relevantstate authorities. Furthermore, by the end of the project both thegovernment and donors decided on the final allocation of grant fundsto Microfinance Institutions.

Organizations have clearly recognized the untapped potentialinitiative and the desire of Cambodians having poor equipments andopportunities. The poor can and will improve their lives with convictionby the foundation of organization’s mission, which empowers the poorentrepreneurship to help themselves through financial services,including credit and savings program. Therefore, the goal of amicrofinance project is to create incomes and employment in poorcommunities through the development of local micro-enterprises and,in the process, to increase the financial well-being of borrowers, theirfamilies, and the community at large.

To reduce the costs in order to become sustainable and improve theoutreach, microfinance institutions should have to be innovative.However, the new development of finance postulates that the successof microfinance program is judged by their ability to reach theunbankable areas. The success in the outreach area is examined forthe breadth, depth, quality, length, cost and variety of products.Moreover, the quantitative dimension of outreach can be measured bythe number of clients, average loan size, percentage of loans toclientele below the poverty line, percentage of female clients, lengthand cost of the services. Quality of outreach can be assessed by therange of products offered to the poor, the level of transaction costslevied on them, and the extent of client satisfaction.

Policy makers need some evidence as to whether or not clients arereceiving direct measurable benefits from microfinance. In addition,considering the large number of dropouts reported by some MFIs,opportunities to redesign MFI products to better meet the demands of


the clients and the issue of impact on clients is increasingly important.The law has made it clear on the process of transformation offinancial NGOs into formal and regulated financial institutions. Anorganization, ACLEDA, was the first to obtain the license in October,2000 as a Specialized Bank and is not under the MFI law. It is able toattract a group of foreign investors including the IFC, DEG ofGermany, FMO and Triodos-Doen along with Triodos Fair Share Fundof Netherlands to become shareholders. Hattha Kaksekar received thelicense as an MFI in October, 2001, second after EMT (presentlyknown as AMRET), and CCB (presently known as CEB) in 2003.

The Asian Development Bank in 1998 had attempted to determinethe existing and future demands for micro credit. It had estimated byundertaking studies of two operators – GRET and ACLEDA as well ason international norms. This exercise, however, was very hazardous,and the estimation varied from 91 to 162 million dollars and looking toto-day, the supply falls well short of demand. Thus there appears to bean impression that the demand for microfinance is higher than thesupply. A study by Uniconsult (June, 1998) estimated that the demandfor rural credit was in the range of USD 75-125 million, which left a gapof approximately USD 50-100 million between the demand and supplyof informal/semi-formal/formal sources. Thus to-day, the demand formicro credit is far from being met, and the expansion strategies ofmicrofinance operators should be more aggressive to meet thedemand for the market.

Credit demands have been separated into group-guaranteed microbusiness loans and individual small business loans. MicrofinanceInstitutions (MFIs) transformed from NGOs have continued of lendingin the form of solidarity groups where lending does not requirecollateral, whereas lending to individuals requires collateral, wherethere is no guarantor. By the end of September 2005, MFIs hadaround 371,000 borrowers with a total loan outstanding more than ofKHR 200 billion and a total deposit of KHR 9.4 billion. The growths ofMFIs with regard to total loans outstanding, number of borrowers, totaldeposits and number of depositors are presented in Table 2.1.


Table No. 2.1Growth of MFIs During 1999-2005

(In million Riel)Source: NBC, 2006.

The above table shows that since 2003, there have beenincreasing trends of total loan outstanding, number of borrowers andnumber of depositors. But, compared to 2004, up to September 2005,there has been a marginal increase in the total deposits of MFIs.

Support from Donor Community

For more than four decades, donors have employed creditprograms in low-income countries to stimulate production, investment,and use of modern inputs. Many of these efforts have involvedcooperatively supervised credit programs, private rural banks, andspecialized development banks. Donors have commonly supportedthese efforts by placing funds into the central bank being on-lentthrough a concessionary credit line.

In the early 1990s, as donors became increasingly interested inmicrofinance, many NGOs started microfinance projects in Cambodia.Following the signing of Paris Peace Agreements and theestablishment of UNTAC and then after the first coalition Government

Year Items

Total Loans Number of Borrowers Total Deposits Number of Depositors

1999 73,238.54 291,453 4,444.91 1,3.872

2000 113,439.04 370,631 5,357.85 165,995

2001 140,163.17 409,963 14,832.17 158,627

2002 201,483.46 328,295 27,859.68 107,150

2003 129,756.06 265,044 9,819.92 78,628

2004 164,488.01 322,056 8,074.72 122,984

2005 203,034.35 371,054 9,441.47 142,843

19


in 1993, donor funds flowed into the country. Thus, MFIs only startedto emerge in the 1990s and the main factors that enabled theestablishment of MFIs or NGO microfinance projects (usually the firststep in establishing MFI) were the security considerations.

The vast majority of financial support to the credit sector has beennegotiated through official government channels, including fundingsources, such as UNDP, USAID, ILO, KWF, CFD, and GTZ. Thesignificant programs are planned, including the possibility of soft-dollarloan from partners. The donor community has been influential both inthe design and the pace of development of microfinance sector.Donor’s support has also reflected their own policy objectives. Onesignificant donor – ADB, has assisted the country government byproviding assistance through grants and soft loans which are on-lentto MFIs. It has placed greater emphasis on policy reforms andcapacity building. The shift stems from the institution’s recognition,enabling policy environment and strengthening MFIs for a viable andsustainable microfinance system, capable of reaching poorer clients.However, most microfinance programs have started and continued tobe managed by Non-Governmental Organizations. Their sources offunding have included grants and soft loans from donors, trusts,foundations, and occasionally from governments. As they grow andproliferate, however, these programs have begun to reach limit of suchresources.

The donating package includes financial start-up support for thenew branches and technical assistance for overall institutionaldevelopment crucial in the context of rural development. In addition,most rural microfinance sectors fund their lending activities with grantsfrom these donating packages in the form of NGOs and projects. Thusthe microfinance sector in Cambodia has been established since1990s by national and international NGOs. Though at the beginning,these organizations were activity involved in programs related to socialdevelopment but later on some NGOs played a role of microfinanceoperators with the financial support from various internationalorganizations. Through these services microfinance sector has beendeveloped since early 1990s. However, operators do not have the


same resources available to overcome the human resource constraint.The largest operator has received significant expatriate technicalassistance from donor’s fund. For example, in 1989 and 1990, withliberalization and due to the arrival of NGOs, solidarity credit schemewas provided and, millions of families became users with real ratesfrom 5 to 20 percent per month. For example, GRET began itsintervention on credit, in 1991 and initially experimental credit schemewas set up, using a solidarity credit system, without preliminarysavings, and with a monthly interest rate of 5 percent.

Many donors however, follow a policy of very limited intervention.As a matter of principle, there can be no doubt to argue that less inter-vention is preferred. However, in building a financial institution, the realissue is how much non-intervention is feasible if the objective of theproject is to be achieved. In reality, an institution-building projectrequires much higher degree of intervention and long-term commit-ment on the part of the donors than other types of projects.

Government Policies on Microfinance

Developing countries have promulgated certain laws to encourageinvestments in provincial and rural development. It has led to makingincentives available to encourage rural development. The Prakas hasclassified banks and microfinance into three different groups: (1)persons who own 5 percent or less are not required to register with orbe approved by the National Bank of Cambodia and have nopersonal liabilities; (2) persons holding 20 percent or more areautomatically presumed to have majority or effective shareholding andthus personal liabilities; (3) in the third group, in gray area between 5percent and 20 percent, in which a stockholder is not automaticallypresumed to be a majority or effective stockholder may be found to beone by the National Bank depending on other facts and circumstances.

Prime Minister Samdach Hun Sen, following the involvement of allministries and stakeholders, launched the National Poverty ReductionStrategy of Cambodia in March, 2003. The idea really is to get peoplethemselves to think about what poverty reduction means and what


they can do towards getting out of poverty. With regard to this, goodgovernance is important when applied for formal microfinanceinstitutions, because the issues may result in potential transfer pricingand transparency. Both non-government and government shouldtransform themselves into commercial forms in order to enhancegovernance and ownership. In addition, Prime Minister Samdach HunSen (1998) stated (Prakas of RGC on implementing credit program ofADB on agriculture) that the Royal Government of Cambodia supportsthe expansion of rural credit and saving through cooperating with thelicensed microfinance institutions and commercial banks. He furtherindicated that improving Rural Development Bank is the key to providerefinancing to microfinance operators for providing long-term loans torural people with sustainability. For strengthening microfinance institutions, the government would create financial laws and regulationsthrough the National Bank. Furthermore, the government wouldmonitor and evaluate the credit activity of microfinance operators andencourage them to become microfinance institutions.

The government has actively participated and continued to ensureevery program related to food security and nutrition and to establish aneffective system of micro credit for providing credit to farmers with theobjective of alleviating poverty at rural level. The government hasestablished the Credit Committee for Rural Development for thepurpose of formulating strategies to improve the efficiency of ruralcredit and to support the institutional strengthening and promotingprivate sectors. The National Bank has the role to coordinate these bymaking a system for microfinance operators to transform them intomicrofinance institutions, recognized and licensed by the NationalBank of Cambodia. Therefore, fund can be preceded from the RuralDevelopment Bank, commercial banks, or local as well asinternational financial institutions.

The institutionalization is found to be necessary, because localcredit sources are important and not by depending on outside sourcesfor fund any more. The government has established RuralDevelopment Bank, under the supervision from the sponsoredpartners, such as ADB and with the active involvement of Ministry ofEconomy and Finance with the main purpose to improve thedevelopment of rural agro-economic activities.


In order to have a positive development of microfinance, thegovernment has tried to issue a number of policies through severalauthorities. Having a legal framework for sound supervision andregulation on microfinance and the role of Credit Committee for RuralDevelopment are important for development of microfinance. Withregard to this, loans from Asian Development Bank to the governmentconsisting of a subsidiary loan to Rural Development Bank forrefinancing licensed Micro Finance Institutions and are supervised bythe National Bank. The government has established a ProjectCoordination Committee whose members are from the Ministry ofEconomy and Finance, Ministry of Rural Development, Ministry ofAgriculture, Forest and Fisheries, National Bank, Rural DevelopmentBank, and Licensed Microfinance Institutions, in order to coordinatethe support for project activities, based on Loan number 1741-CAM(SF).

A new law on banking and financial institutions has beenpromulgated and the law provides a legal framework for organizationsand operations of all types of banking sector, including microfinanceinstitutions. The supervision of microfinance requires the samecommercial bank, such as their capital adequacy ratio and minimumreserve for microfinance institutions. With the advice from its partner,the National Bank has been issuing new regulations, circulations orannouncements to monitor and gain more control on the financialsector. All organizations giving credit must be registered with thegovernment and all organizations over a certain size must becomelicensed. Moreover, to promote microfinance institutions, the bank hasissued regulations on capital guarantee that shall be permanentlydeposited with certainty. For example, 10 percent is for a commercialbank and specialized bank and 5 percent for microfinance institutions.It has further indicated that the National Bank requires commercial,and specialized banks 8 percent, and microfinance institutions 5percent of their deposits received as a legal reserve. Thus in 2000, theNational Bank has classified MFIs into three categories according tothe level of their operations, and made provisions for licensing andregistration. Though the regulations are similar to commercial banks,the capital requirement is substantially less. The medium-sized MFIs


registered by National Bank are exposed to lighter regulations,whereas the smallest MFIs can operate freely with no requirement tobe regulated and supervised due to high operating cost. As it isrealized, the NBC is strengthening the implementation of the uniformchart of accounts for MFIs and the disclosure requirements inaccordance with the international accounting standard with theultimate aim to strengthen the microfinance sector in the country.

Planet Finance concluded that having established a framework forsound supervision and regulation is crucial to address thedevelopment of human resources and mobilization of savings toenhance sustainability of microfinance businesses. Microfinancesector is one of the important tools of the government in promotingeconomic growth and alleviation of poverty in rural areas. With strongsupport from the government, its partners are now providing anopportunity to microfinance institutions licensed by the National Bank.The government has normally provided fund through an assignedMinistry; its partners have supported the amount of fund. As per themeeting of the Project Coordination Committee in 2001, the RuralDevelopment Bank is the source that borrowers can access to borrowa certain amount in US dollars. With respect to single borrowerexposure limit applied to Rural Bank, the National Bank considers thelong-term loans from the Government as subordinated debt. TheNational Bank has issued the PRAKAS requiring microfinanceoperators to obtain either a license or registration. The registration andlicensing are determined according to the level of loan portfoliooutstanding, saving mobilized, number of clients and geographiccoverage. A license allows a microfinance institution to conduct creditactivities and accept savings from the public. Thus, the National Bankhas tried to push microfinance by determining that licensing is acompulsory condition by limiting loan outstanding amount, number ofborrowers, saving amounts, and number of depositors. Moreover, theGovernment policy is to support the expansion of rural credit andsaving services by encouraging the entry of privately licensedmicrofinance institutions and commercial banks into the sector. Withregard to this, the Government has established the interbank marketto assist the National Bank in undertaking policy reforms. Additionally,


it has also established a Banking and Financial Service in order tosteer the restructuring process of the banking sector.

To speed up licensing to microfinance institutions, expandingoutreach and getting loan from Rural Development Bank are the tasksof the Project Coordination Committee that makes suggestion to theNational Bank of Cambodia. With regard to this, the National Bank hasprovided licenses to two microfinance institutions – Thaneakea Phumand CEB and issued regulations to three microfinance operators.These regulations focus on monitoring the microfinance institutions inorder to implement that can lead to sustainability.

The poverty reduction strategy primarily focuses on improving ruralroads, primary health care, sanitation, rural water supply, education,rural credit, community development, household family system,provisions of seeds, fertilizer, rice bank, micro-enterprises andinformation at the village level. With regard to this, some licensedmicrofinance institutions are now able to provide their credit servicesto the poor in a more effective manner. However, providing creditservices to the poor is still at risk. Generally, it is found thatNon-Governmental organizations take greater risk in trying to reachthe poor and other marginalized groups. The organizations thus, playa critical role in poverty reduction and the development of ruraleconomy. In addition, credit services also play an important role increating, supporting and expanding businesses as well as increasingproductivity that generates income and raising the standard of livingand thereby helps in reducing poverty.

Rural Development Bank is a source for providing credit to ruralfinancial sector. It has a clear mandate from the government to act asa wholesale bank. The new microfinance legislation passed in 2000requires that all credit providers must have to register with the NationalBank. It provides an opportunity for selected microfinance institutionsto obtain licenses as fledged MFIs with a minimum capital. Thegovernment also leaves the operators free to set their interest rates.Moreover, the policy of the National Bank of Cambodia has been asupport, in line with its concerns and responsibilities for preserving the


integrity of the financial system, promoting public confidence in thefinancial system, protecting deposits, preventing fraud, andencouraging best management practices. Thus to ensure a healthymicrofinance environment, the government, along with the NBC hasset up a policy that urges all credit operators to register andsubsequently to obtain a license. However, the government inpromoting economic growth and financial stability, often providesvarious financial safety arrangements.

The indicator of success for immediate output has to be adopted bythe government policy enabling financial viable and sustainable creditand saving institutions to develop. The government has alsoundertaken financial sector reforms with the aim of developing a soundfinancial system, which is an important factor for stimulatingeconomic growth. It has adopted the rural credit policy to develop aneffective rural financial system, and has initiated the rural credit andsavings program and technical assistance for capacity building forrural financial services. In addition, NBC has continued to strengthenmicrofinance institutions with special emphasis on provision of ruralcredit. Its regulations have pushed some microfinance NGOs totransform themselves into licensed microfinance institutions. Themandate on a general guideline in the field of rural credit has beendeveloped by Credit Committee for Rural Development (CCRD) inorder to offer with legal frameworks (credit associations, articles ofassociation for the rural financial institutions), and to make sure thelaw is properly applied. During 1994 to 1996, the Decentralized RuralCredit Committee has facilitated to bring operators and the authoritiescloser and to allow the later to better understand the problems facedby decentralized financial systems. This jointly run organization,having ceased to exist the National Bank of Cambodia, assumed theresponsibility for supervising this sector through its Bureau for theSupervision of Decentralized Bank Systems. This Bureau was set upin 1997 within the Department of Banking Supervision and since 1998,this Bureau has been actively involved in providing help to introduceregulations specific to microfinance institutions.


The products of MFI are primarily loans, as non-registered MFIs arenot permitted to take deposits. Most MFIs have started with solidaritygroup loans, enabling them to reach people who would have nocollateral to access a loan. A more recent response to the demand aswell as the need to work towards sustainability due to donor andmicrofinance providers, such as Concern and Catholic Relief Services(CRS) have compulsory savings, which is kept in a village bank andre-loaned to community members as emergency loans. Thegovernment supports the expansion of rural credit services byencouraging the entry of private licensed microfinance institutions,specialized and commercial banks and by strengthening the role ofRDB as a wholesaler. RDB provides long term funding to encourageinstitutions to expand and to make long-term loans which arenecessary to finance the capital investments of the rural people.

The projects of ADB and IFAD have provided soft loans to the RuralDevelopment Bank through Royal Government of Cambodia in orderto implement rural microfinance component under its project toincrease food and income security for people in the area.

Role of Rural Development Bank

The RDB was established as a key mechanism to support andstrengthen microfinance services in rural areas includingdevelopment, promotion and financing of Small and MediumEnterprise (SME) activities. It is strongly believed that microfinanceand micro business development in the rural areas are crucial for thesocio economic development of rural Cambodia.

RDB is a public and autonomous financial institution. It is acting asa wholesale bank and executive agent of donor and other loanprograms and projects, providing financing and refinancing to licensedcommercial and specialized banks and microfinance institutions,which delivered credit and saving services to rural poor as well as toindividuals and small and medium enterprises.

The objective of the RDB is to promote rural, agricultural and


economic development in order to participate in the poverty reductionand raise the living standards of the people. Also it is to providewholesale lending services to operators to on-lend to the people inrural areas in the Kingdom of Cambodia. The RDB is committed toprovide sustainable access to credit in support of agricultural and ruraldevelopment for selected commercial sectors (rural water supplyproject, family rubber plantations, rice and maize cultivations, etc.) aswell as for small and medium enterprise development (SME), basedon free market systems. Even though Cambodia is having a freemarket economy, the RDB has been trying hard to negotiate with itspartners so that the interest rate charged from the end-borrowersreduces step by step. Due to the efforts made by RDB, in the wholecountry, the interest rates have been reduced and in some places itdecreased from 5 percent to 2.5 percent per month. As a widercommitment, RDB and the credit operators have extended theiroperation, as a priority step, to the border and remote areas, which arefound to be economical potential areas for agriculture and agro-industry for the sole purpose of transforming them into agriculturaldevelopment areas.

From the above discussion, it is beyond doubt to justify that formalcredit has a positive role in developing the rural economy of Cambodiaand microfinance institutions has a further more definite role to playtowards the development of the economy as a whole. In building astrong financial base in the rural sector, the role played by the RoyalGovernment of Cambodia, the NBC and RDB are praiseworthy.Further, the committeemen to support the poor people by theinternational donors and local institutions is well recognized.


III

Cambodian Banking System and Microfinance Operators

Cambodian microfinance though is very young, has been recognizedinternationally as a fast developing sector. It is highly rated since itcommenced its path towards a sound regulatory, supervisory andmanagerial environment. Today it is seen as an emergingindustry in the country. It plays an important role to develop andexpand financial services in the rural areas and in the process,actively participate in alleviating poverty. The development ofmicrofinance institutions is to remove the restricted access, one of themain obstacles, to financial services in rural areas in order to improvethe living standard of the rural poor. The success of microfinanceinstitutions entirely depends on micro loan to the poor. The program offinancial and non-financial services for micro and small enterprisesaims at contributing to the country’s long-term economic development.This also has a direct impact on services provided to rural poorpeople, resulting in augmenting income and generating furtheremployment. It is an important mechanism for rural developmentwhose role is not only to create and diversify employment, but also toenhance productivity and generate income so that the standard ofliving of the people can be improved.

The Cambodian microfinance sector has been established since1990s by both the national and international non-governmentalorganizations. The National Bank of Cambodia (NBC) beganreforming the banking system in early 2000. It started to issue andrevise regulations in order to transform NGOs into registered andlicensed MFIs. Since 2002, some NGOs have been licensed andsome others have been registered. By the end of 2005, 16 licensedand newly established MFIs have been transformed from NGOs and24 registered as rural credit operators.

In spite of several constraints, there are some microfinanceoperators who are striving hard to bring success to their organizationson one hand and providing wider benefits in terms of income,employment, higher productivity, etc. to the target population on theother hand. Against this backdrop, the main purpose of the presentchapter is to highlight the Cambodian banking system along withcases of some of the major microfinance operators in the country.

Cambodian Banking System

The banking system in Cambodia was completely destroyed in theyear 1975 and in fact, there were absence of financial services from1975 to early 1979. A mono-banking system was established in 1979with NBC playing the role of both central and commercial bank througha network of provincial branches. Under the mono-banking system, theNBC financed state-owned enterprises as well as small loans to needyfarmers based on mutual guarantees, through twenty provincialbranches all over the country. With the privatization of the bankingsector in 1990 and the cessation of the NBC as a commercial bank,the needy borrowers/enterprises were deprived of accessing financialservices. However, in some areas in the country, the provision of smallfinancial assistance was taken over by non-licensed credit providers.After the adoption of the law on Banking and Financial Institutions atthe end of 1999, the NBC launched a banking system restructuringprogram by requiring all banks to apply for re-licensing. Further in2000, the NBC started to issue regulations on the classification ofMFIs into three categories according to the level of their operationsand revise regulations in order to transform NGOs into registered andlicensed MFIs as per their scope of operations. At the end of 2005, theCambodian banking system in composed of 15 commercial banks, ofwhich 12 are locally incorporated and 3 are foreign branch banks, 4specialized banks, of which one is state-owned and 3 are privateowned, 16 licensed MFIs and 24 registered micro operators operatingin the rural areas, which is presented below.


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Cambodian Banking System and Microfinance Operators 31

Registered NGOs

1. Agriculture and Tourism Development Association2. Aid Farmers Association3. Association for Business Initiative4. Association for Development of Diversified Khmer Nation5. Buddhism for Development Association and Supporting

Environment6. Cambodia Community Saving Federal7. Cambodia Credit to Abolish Poverty Organization8. Cambodia Rural Economic Development Organization9. Cambodia Women's Development Agency10. CICM Cambodia11. Crop Supporting National Association12. Islamic Local Development Organization13. Khmer Rural Development Association14. Kratie Women Welfare Association15. Lutheran World Federation Organization16. Ministry of Rural Development Credit Scheme17. Northwest Development Association18. Rural Development Association19. Rural Economic Development20. Rural Family Development21. Social Development in Rural22. Ta Ong Soybean Development Association23. Women's Saving and Development Cooperative

Microfinance Operators

It has been widely recognized that even if the Cambodian bank-ing sector grows quickly, the country needs to promote themicrofinance sector as it provides credit to the needy borrowers inrural areas with reasonable interest rates to fund their investments. Abrief elaboration of some selected microfinance institutions ispresented below:


ACLEDA Bank Plc.

In January 1993, the Association of Cambodian Local EconomicDevelopment Agencies (ACLEDA) was established as an independentCambodian NGO with the sole purpose of developing small and microenterprises. It was aiming at raising the standards of living of the poorby promoting economic activities ranging from self-employment andsmall to medium size business. The Ministry of Commerce issuedACLEDA a Certificate of Incorporation as a Public Limited LiabilityCompany in August 2000. ACLEDA completed the transformation fromNGO to a bank and the National Bank of Cambodia granted ACLEDAa license on 7th October, 2000. Thus, following the transformation intoa licensed specialized bank, ACLEDA Bank was established inOctober 2000, and the original ACLEDA was officially renamed theACLEDA NGO. Under the process, the existing NGO transferred theassets and on-lent its liabilities (long term loans from donors) to thenew ACLEDA Bank. On 1st December 2003, the National Bank ofCambodia issued a license for the bank to become a privatecommercial bank for a period of three years commencing from 1stDecember, 2003. Thus, the most momentous event of 2003 was theconversion of ACLEDA from a specialized bank to a full commercialbank and this had entailed an increase of its paid-up capital from USD4 million to USD 13 million. Further, with the granting of a commercialbanking license, it has laid to build the bank into a leading micro, retailand commercial bank in the country. In 2004, it expanded more thanat any time in its history and now ranks among the top threecommercial banks in the country. In ACLEDA Bank, 51 percent ofequity is owned by Cambodian interests, including its staff while theremaining 49 percent has been taken up by foreign investors in equalparts, such as International Finance Corporation (a division of theWorld Bank), DEG (Germany), FMO (Netherlands) and Triodos-Doenalong with Triodos Fair Share Fund (Netherlands). To sum up, todayout of the 15 commercial banks in the country, only ACLEDA hastransformed from an NGO operating microfinance into a specializedbank and finally to a commercial bank.

33


In 2004, one of the significant developments on the part ofACLEDA Bank Plc. was of obtaining a rating from an InternationalCredit Rating Agency, i.e. Moody’s Investors Service. This was the firsttime that an international credit rating has been done to a Cambodianfinancial institution. It has assigned in awarding a Bank FinancialStrength Rating (BFSR) of ‘D’ with rating outlook of ‘stable’. Moody’scommented that this reflected ACLEDA’s rapidly building franchisestrength and its strong profitability, capitalization and asset quality(Annual Report 2004).

Today ACLEDA has claimed of having the largest bank network inthe country, i.e., the net work expanded by 23 percent to 119branches and offices and, with the addition of Kratie and Koh Kong,now it covers 21 out of 24 provinces (Annual Report 2004). This isshown with the help of the map given below.


The financial highlights of the bank for the periods 2003 and 2004are presented below.

Table No. 3.1Financial Highlights of ACLEDA During 2003-2004

(Unit in USD’000)

Note: Unit in USD’000 except EPS and dividend.Source: Annual Report 2004, ACLEDA

In 2004, ACLEDA Bank expanded more than at any time in itshistory and now ranks amongst the top three commercial banks inCambodia. During the year total assets increased by 74 percent toUS$ 84.1 million. The loans outstanding advanced rose by 63 percentreaching US$ 64.9 million, whereas deposits surged by 140 percent toUS$ 31.6 million. Reserves and retained earnings rose by 43 percentto US$ 4.2 million. The net profit after tax grew by 4.5 percent toUS$2.063 million. The number of borrowing clients increased by 23.5percent to 122,173 in 2004 from 98,905, whereas the number ofdepositors rose by 62.8 percent to 57,091 in 2004 form 35,054 in2003.

Though ACLEDA has rapidly move into commercial banking, but

Iteme Up to December2004

Up to December2003

Percentagechange

AssetsLoans(Net of Provison)LiabilitiesDepositsIssued and Paid-up

CapitalShareholder’s Equity Total IncomeProfit Before TaxNet Profit After TaxEarning Per ShareDividend

84,109 64,93258,17431,64013,00025,93517,1282,5582,063

$0.1587$0.0630

48,24039,90832,30613,16113,00024,65811,7582,4611,974

$0.1518$0.0607

74.462.7 80.1

140.4-

5.245.73.94.54.53.8


microfinance and small-scale credit has remain as the corebusiness. Its dominant position in provincial and especially rural areasprovides a competitive edge to the bank.

AMRET

Having a clear vision to contribute to rural development in order toimprove the living standards of the people, AMRET, formerly known asEnnatien Moulethan Tchonebatt (EMT) was incorporated in Cambodiaand registered with the Ministry of Commerce as a Private LimitedLiability Company on 10th July, 2000. Primarily it is engaged in theprovision of microfinance services to the rural population through itsheadquarters in Phnom Penh and various provincial offices in thecountry.

AMRET has a long history in the achievement of its mission – toprovide financial services that are suitable for the needs of the ruralpopulation while ensuring its long-term sustainability. Groupe DeRecherche et d’Echanges Technologiques (GRET) a French NGO hadset up an experimental project to deliver micro credit to the rural pop-ulation in the country in 1991 and this first experimental phase (EXPEI) was launched with a single financial product known as SolidarityCredit (SC). In 1995, a second experimentation phase (EXPE II) wasinitiated. The Solidarity Credit was modified under new proceduresand an Individual Credit (IC) product was launched. With the comple-tion of experimental phase I in 1998, all the activities were transferredto experimental phase II. In 2000, EMT was made a Private LimitedCompany with a registered share capital of KHR 330 million. Allassets, liabilities and reserves of the project were transferred to EMTon July, 2000. EMT has received its MFI license from the NationalBank of Cambodia in 2001. It has obtained its renewed license fromthe National Bank to conduct business as a microfinance institution inApril, 2004, which will expire on 18th May, 2007.

In AMRET, 47.45 percent of equity is owned by GRET, France. Thenominal value of each share is KHR 200,000. A total of 2,673 numberof shares is owned by GRET which is the highest, compared to La


Fayette Participations (LFP) 19.50 percent, Société d’Investissementet de Développement International (SIDI) 18.85 percent andInvestisseur et Partenaire pour le Développement (I & P) 14.20percent.

During 2004, AMRET has expanded its activity in the 10 existingprovinces and entered a new province – Kompong Thom. Consideringthe need of the market, it has introduced different financial productsprimarily designed to fit to the varied business activities of thecustomers.

With regard to the achievements in several fronts, 2004 was anexcellent year for AMRET. The number of active clients increased at arate of 14 percent, i.e., from 92,173 in 2003 to 105,283 clients in 2004.Besides, the loan outstanding significantly increased at a rate of 40.6percent, i.e., from KHR 22.2 billion in 2003 to KHR 31.2 billion in 2004.Furthermore, the net profit reached US$ 700,000, considered to be thebest financial result of AMRET so far. During 2004, amongst 90 creditoperators, the market share of AMRET represents 26.5 percent interms of clients and 9.5 percent in terms of loans outstanding. Theglobal loan disbursement in 2004 was KHR 37.5 billion (grew by 42percent compared to 2003) of which 87 percent was amounted to


114,000 Solidarity Credit clients and the actual disbursement reached107 percent of the target in the said year. Of course, this increasestems largely from the individual credit. In 2004, on average, SolidarityCredit clients borrowed KHR 275,000, whereas the borrowing amountof an Individual Credit client was KHR 1,120,000 (Annual Report2004).

The financial highlights of the bank for the periods 2003 and 2004are shown below.

Table No. 3.2Financial Highlights of AMRET During 2003-2004

Source:Annual Report 2004, AMREY.

Considering the market demand in a fast changing environment,AMRET is ready to introduce new financial products to meet the needof the clients. But at the same time, it is committed to provide itstraditional services to the clients, which is a firm committement on thepart of AMRET and of course, is a major challenge for a growing MFI.

ItemsYear

2003 2004

Total Assets

Loan Portfolio

Equity plus Quasi Equity

Net Income/Average Total Assets

Net Income/Net Financial income

Net Financial Income

Average Amount Solidarity Credit (SC)

Average Amount Individual Credit (IC)

KHR 29.6 billion

KHR 22.2 billion

KRH 13.0 billion

9.2%

28.5%

KHR 7.7 billion

KHR 228,800

KHR 807,900

KHR 39.3 billion

KHR 31.2 billion

KHR 15.5 billion

9.7%

29.5%

KHR 9.6 billion

KHR 274,100

KHR 913,100


Hattha Kaksekar Limited (HKL)

In pursuance to support the rural people in Pursat province ofCambodia, OCSD/OXFAM – Quebec, a Canadian organization hadcreated a food security project in May, 1994 with the main objective tocarry out an important role in disbursement of credit. The projectstarted to disburse its first loans in August, 1994 but was confined tofour communes of the same province. In November, 1996 as aNon-Government organization in the name of Hattha Kaksekar itregistered with the Ministry of Interior, Cambodia.

Hattha Kaksekar NGO had its central office in Sampov Meas districtof Pursat and its branches were opened in Staung, Kravagn districts,along with the district in which its central office was located. While thebranch of Staung district had received financial support from theGerman International Aid Agency (GTZ), the French Agency for theDevelopment (AFD-Agence Francaise de Développement) hadsupport its branch located in Kravagn district of Pursat province.Subsequently the opening of Siem Reap branch in February, 2000,was supported by both AFD and the Ministry of Economy and Finance.Further, for operational convenience, the Staung district branch wasdivided into two branches with a clear geographical jurisdiction for theiroperation.

In April 2001, Hattha Kaksekar NGO registered with the Ministry ofCommerce with a paid-up capital of USD 77,850, subscribed by fourshareholders: Hattha Kaksekar NGO, HK Staff Association, Sociétéd’Investissement et de Développement International (SIDI) and Mr.Jean Thiboutot, a private individual, who had worked as a consultantfor Hattha Kaksekar NGO. At this time the activities of HK NGO weretransferred to the Limited Company, which was given the name ofHattha Kaksekar Limited.

The National Bank of Cambodia had granted a microfinance licenseto HKL to conduct credit and savings activities in Cambodia in October,2001 initially for a period of three years. To become sustainable and


effective in achieving its mission and goals, HKL undertook somerestructuring programs. Further, in 2002 opening of another branch inBanteay Meanchey province was done with the support of Save theChildren (SC), USA in order to expand its activities.

In 2003, HKL had raised its paid-up capital from USD 180,000 toUSD 257,850 with a 19 percent participation of CORDAID, a DutchNGO. Presently, 49.85 percent of equity is owned by HK NGOamounting to USD 128,550 which is the highest. The othershareholders are Solidarité Internationale pour le Développement etl’Investissement (SIDI) with 19.95 percent, CORDAID with 19.40percent, HK Staff Association 9.82 percent and an individual memberwith 0.98 percent of equity, thus amounting to a total of USD 257,850.

In terms of its geographic outreach, HKL is operational in fourprovinces, such as Pursat, Siem Reap, Banteay Meanchey andKompong Thom by the end of 2004, covering 26 districts, 153communes and 1,051 villages with its head office in Phnom Penh,relocated from Pursat.

HKL provides loans in US Dollars, Khmer Riels and in Thai Baht tofarmers, micro-entrepreneurs, traditional manufacturers, small andmedium traders, service providers, agricultural activity makers, etc.,living in rural and sub-urban areas. The loans are divided into twotypes of repayments, in equal monthly installment along with theinterest and balloon payment at the end of the cycle. The loan term isup to 24 months depending on the loans size, which is categorized upto USD 3,000. The interest is offered at a reasonable and competitiverate. HKL also offers a service to mobilize savings from its borrowers,publics and even staff. There are compulsory savings, voluntarysavings and term deposits.


The geographical outreach of its operations is given below.

HKL became self-sufficient in terms of financial and operationalstatus. The company was able to grow its loan portfolio from USD 1.4million to USD 2.4 million, which represents an increase of 67 percent.This increase brought the financial income from USD 398,526 in 2003to USD 589,847 in 2004, i.e., an increase of 48 percent. At the end of2004, HKL yielded a net profit amounting to USD 113,237, i.e., 195percent increase from the previous year. The operational and financialself-sufficiency ratio was 118 percent excluding other income fromloan recovery. Being a member of Planet Finance, HKL had anopportunity to receive financial support of up to 80 percent of the totalbudget to conduct a rating. During the year, HKL was rated byMicro-Credit Rating International Limited (M-CRIL), India. The resultwas satisfactory and it reflected the efforts and improvement of theinstitution. HKL’s strengths as rated by M-CRIL are in the line of


focused operations, clear organizational structure, focused onsustainability, professional trained management team, goodaccounting system and MIS, efficient loan tracking systems, strongcapital adequacy, good portfolio and profitable operations.

However, looking to the competitive environment in themicrofinance sector on one hand and the need for social commitmenton the other, HKL has to gear up the activities to meet its well-definedmission and goals set before it.

Cambodian Entrepreneur Building Limited (CEB)

Cambodian Entrepreneur Building Limited (CEB) formerly knownas Cambodia Community Building (CCB) was established in 1995 andregistered with the Ministry of Interior as a local Non-GovernmentOrganization (NGO) with the main objective to offer financial andhealth education services to poor communities. In late 1999, CCBadopted a minimalist microfinance approach with focus purely oncredit and saving services only. Further, in 1999, CCB registered withNational Bank of Cambodia (NBC) as a microfinance operator. Itstarted its efforts to transform into a licensed microfinance institution inthe year 2000. In February 2003, it was incorporated as a PrivateLimited Company and registered with the Ministry of Commerce underthe new name of Cambodian Entrepreneur Building Limited. In thesame year, it obtained license from National Bank of Cambodia as amicrofinance institution to undertake credit and saving services forpoor and low-income households and small enterprises operating inthe country.

With a clear vision to become a leading regulated microfinanceinstitution in entrepreneurship building of poor, especially women inboth urban and rural areas in the country, CEB is supportingentrepreneurial women in both the areas in starting as well asexpanding several income generating activities and micro business toenhance their standard of living. Further, CEB is dedicated to fulfill itsmission – empowering entrepreneurial poor especially women inurban and rural areas to develop their income generating activities and


micro enterprises through access to microfinance services, includingcredit and savings at reasonable rates.

So far equity of CEB is concerned, 45 percent is owned by CCB NGO, 43percent by Shorecap International Ltd. (U.K.) and rest 12 percent is owned byCEBEC (Staff Company). Initially, Shorecap International, a microfinance andsmall business bank equity fund invested USD 500,000 in equity in December2004, and extended USD 250,000 as convertible loan. Subsequently,it has converted the loan into equity. The total share registered of CEB is ofUSD 1,158,470.

CEB is presently operating in 5 provinces of the country and hasprovided assistance to more than 97,912 poor women and theirfamilies altogether around 588,516 people. The operational provincesare Phnom Penh, Kandal, Kompong Thom, Kampong Cham and SiemReap.

The portfolio outstanding of CEB by December, 2004 was USD 3.7million which has increased to USD 6.3 million in the year 2005 andthus has grown by 70 percent over a period of 2004 to 2005. It hasgranted 258,429 loans with total disbursements more than USD 32million and has mobilized more than USD 1,297,616 as compulsorysavings.

CEB has successfully grown over the periods of its operation andbecome a leading microfinance provider in the market. Its productdesigns are best fitted to the market demand. CEB offers individualloan product (first to introduce in 1999) along with group andcommunity bank loan model. Besides, it offers branch service officesin addition to its mobile banking loan model. The portfolio quality ofCEB has been in a good position in the last four years by maintainingmore than 99 percent on time repayment rate.

CEB has received financial, technical and other support fromseveral organizations over a period of time. This made CEB to becomemore committed for the development of poor women in both rural andurban areas by enhancing their entrepreneurial capability.


GTZ supported CCB NGO as one of three MFIs to startmicrofinance operations in Kompong Thom province in March 1997. Italso provided some technical assistance for the transformationprocess from mid 2001 until early 2004, including some co-financingwith Mekong Project Development Facility. The Mekong ProjectDevelopment Facility (MPDF), administered by the IFC, supported

CEB in its final transformation process beginning in December 2003through provision of technical assistance, capacity building andsupport in mobilizing equity investments and long-term borrowings.

Rural Development Bank (RDB), was the first creditor of CEB Ltd.,providing a USD 50,000 credit facility in March 2001. Through RDB, inApril 2001, International Fund for Agricultural Development (IFAD)selected CCB NGO as one of three MFIs to offer funding formicro-finance services provided to farmers in Siem Reap Province.The Asian Development Bank (ADB), first provided a loan facility toCEB through the RDB in July 2004, and as of November 2005, thisloan balance was $600,000.

Blue Orchard (Dexia Fund), an international micro-finance fundbased in Switzerland, granted CEB Ltd. a USD 150,000 loan for 18months in June 2003. After performing satisfactorily, Blue Orchardsubsequently extended additional facilties, and as of October 2005,the outstanding balance of Blue Orchard loan was of USD 350,000.Triodos Doen and Triodos Fare Share, a developmental oriented bankbased in the Netherlands, granted CEB a three-year loan of USD500,000 in August 2003 under the Triodos-Doen micro-finance fund,and extended an additional USD 200,000 three-year loan in December2004. In December 2005, Triodos Doen has invested in equity fundwith CEB amounting 500,000 USD in beginning of year 2006.Oikocredit, an international micro-finance fund based in theNetherlands, granted a three-year loan of USD 500,000 in December2003 and extended an additional USD 1,500,000 in September 2005,also for a period of three years. USAID has agreed to support CEB Ltd.as one of three MFIs. It is assisting in borrowing funds fromCambodian commercial banks by offering credit guarantees up to USD


1 million to these banks. Novib, a fund of Oxfam International, madeCCB NGO a USD 60,000 grant for the introduction of the MicroBankerWindows software, and has also granted CEB a USD 500,000 threeyear loan. BIO of Belgium granted CEB a USD 1 million three-yearloan in March 2005. Further, FMO (Netherlands) signed a term sheetfor a USD 2.5 million 5-year loan facility in September 2005, and isinterested in making a USD 500,000 equity investment in early 2006.

CEB has played a vital role in establishing the CambodiaMicrofinance Association in 2003. Over the past few years, CEB hasgained significant success and this is complemented by the supportfrom all stakeholders including the critical support from NBC as aregulator.

PRASAC MFI Ltd.

The PRASAC MFI Ltd. as a new Limited Liability Company wasregistered with the Ministry of Commerce in August 2004 and receivedits MFI license from the National Bank of Cambodia in November2004, initially for a period of three years to offer financial services tothe rural community and micro enterprises.

The Programme de Rehabilitation et d’Appui au Secteur Agricole duCambodge (PRASAC) project started in 1995 as a support program forthe agricultural sector in Cambodia and was implemented during theperiod January, 1995 to April, 1999 covering six provinces of thecountry. This was the first phase of the project. The second phase ofthe project (PRASAC II) was in operation during May 1995 to April1999. Both the phases of the project were funded by the EuropeanCommission (EC). The second phase of the project had agricultural,rural infrastructure, community development, institutionalstrengthening and credit and micro-enterprise components. SeveralMinistries of the Royal Government of Cambodia were theimplementing agencies of the various components of the project.Though the second phase of the project (PRASAC II) was formallyclosed in December 2003, but the financing agreement between theEC and the Royal Government of Cambodia (RGC) remained valid


until the December 2004. Hence the EC had extended its technicalassistance during that period to finalize the transformation of PRASACCredit Association (PCA) into a licensed MFI in the name of PRASACMFI Ltd. Finally, it completed its transformation process and receivedits MFI license from the NBC in November 2004 with CRDF (a NGOregistered with the MoI) and Staff Company Ltd. as its initial twoshareholders.

To achieve its vision of contributing to sustainable rural economicdevelopment in order to improve the living standards of the ruralpeople through creation of sustainable access to financial services forrural communities and micro-enterprises, the PRASAC MFI Ltd iscommitted to offer financial services to the rural community and microenterprises under high professional and moral standards, ensuringtransparency and good governance in all operational levels in asustainable manner.

To be a leading MFI in Cambodia, it is involved in providingfinancial services, such as credit services (group loans and individualloans) and savings (savings and time deposit) services to ruralcommunities, households and small as well as medium sizeenterprises and there by making its presence in 11 provinces of thecountry with an active clients of 63,031.

The loan outstanding (net) of PRASAC MFI as of 31st July 2005was KHR 36,650,498,760. With a total operating income of KHR7,066,866,712, the net operation income and net profit before taxbecome KHR 2,597,138,352 and KHR 2,184,848,611 respectively.

Targeting to the small and medium enterprises (SMEs), PRASAChas introduced dollar loan currency to the market since July 2005 witha borrowing limit of USD 10,000. Again from July 2005, it hasintroduced its two first savings products available both in KHR andUSD.

PRASAC MFI Ltd. was awarded with Financial Transparency Awardby CGAP for achieving a high level of compliance with international


standards for financial reporting.

Angkor Mikroheranhvatho (Kampuchea) Co. Ltd (AMK)

AMK was registered as a Limited Liability Company with the Ministry ofCommerce in May 2003, and began its operations from the 1st July 2003. It gotits microfinance operating license from National Bank of Cambodia (NBC) inMay 2004.

Angkor Mikroheranhvatho (Kampuchea) Co. Ltd (AMK) originatedout of the savings and credit activities of Concern WorldwideCambodia, which started working in Cambodia from 1993. From 1997to 1999, savings and credit activities were separated from thecommunity development work and became one of the programsdirectly implemented by Concern Worldwide Cambodia. From 1999 to2002, Concern started the process of developing the program into anindependent Cambodian Microfinance Institution (MFI), following thenew Cambodian microfinance regulation that stipulated the creation ofa separate company and obtaining an MFI license once theoutstanding loan portfolio exceeded KHR 1,000 million (equivalent toapprox. US$250,000). The credit and savings program was namedThanakea Ponleu Thmey (TPT) in 2001. However, the bulk of thetransformation process from Concern-TPT program into AMK Co Ltdtook place during the second part of 2002 and 2003.

To achieve its mission towards helping the poor people in ruralareas to increase their livelihood options through sustainable deliveryof appropriate and viable microfinance services, AMK has clearlydefined its guiding principles with a strong commitment to follow thesame.

In AMK, 99.9 percent of equity is owned by Concern Worldwide(Dublin), whereas the rest 0.1 percent is owned by Concern WorldwideUK. The initial share capital was of KHR 250 million which wasapproximately USD 62,672.

By the end of 2004, AMK has expanded its activity in three

47


provinces of the country, such as Banteay Meanchey, Pursat andKompong Speu covering 610 villages with an activitive borrowers of20,502 an increase of 11.28 percent compared to 2003. Subsequently,it has extended its outreach in another two provinces of the country,such as Siem Reap and Battambang covering 912 vallages under 174communes and has provided services to 36,267 to active borrowers.In 2006, AMK has extended its operation in two more provinces, suchas Kompong Chnnang and Kompong Cham. AMK targetseconomically active poor to support its financial services. Currently,AMK is offering three credit products, such as group-guaranteed loanswithout any physical collateral requirement and one individual loanwhich requires physical collateral and personal guarantees. Solidaritygroup loan product is the flagship product of AMK, where clients canborrow and repay at any point during the cycle. Besides, theloan-linked compulsory savings, AMK also offers voluntary savingsproduct to the customer. The financial and operational highlights ofAMK for a period 2003 to 2004 are given below.

So far as the main providers of financial services in rural Cambodiais covered, AMK is committed to provide sustainable and viablemicrofinance services to the poor people particularly in the rural areasto enhance their income and standard of living.

The National Bank of Cambodia started to issue and reviseregulations in 2000 for transforming NGOs into registered and licensedMFIs according to their scope of operations. As a result, by the end of2005, there are 16 licensed MFIs and 24 registered as rural creditoperators. The vision for microfinance in Cambodia is to establish aviable and sustainable private microfinancial market. To achieve thisvision, the Royal Government of Cambodia provides a supportive andappropriate institutional framework to that market. Thus today inCambodia, microfinance activities have steadily and increasinglyturned into an important industry committed to provide necessarysupport in a sustainable manner to the poor. Further, though more andmore NGOs have acquired licenses and transformed themselves intolicensed MFIs, achieving financial stability, ensuring effectiveself-regulation mechanism and bringing overall development plans are


necessary considering the fast changing environmental conditions ofthe country.

Table No. 3.3Financial and Operational Highlights of AMK During 2003-2004

Source: Annual Report 2004, AMK.


ItemesYear

2003 2004

Number of active borrowers

Women borrowers (%)

Number of Savers

Loan portfolio

Group loans (%)

Individual loans (%)

Average first group loan perborrower

Average outstanding loan per borrower

Average outstanding loan per borrower/GNI pc

Operational Selt Sufficiency (OSS)

Return on Assrts (RoA)

18,428

80%

0

US$843,330

100%

-

US$38

US$45.8

15.3%

71.60%

-10.74%

20.502

85%

709

US$1,202,122

93%

7%

US$38

US$58.6

19.5

93.00%

-2.00%

IV

Microfinance and Beneficiaries

The present chapter analyses the impact of micro credit provided byMFIs on the standard of living of beneficiaries in terms of income,expenditure, asset position and cash flow. Furthermore, a comparativeanalysis has been made between the beneficiaries and the non-beneficiaries on the basis of income, expenditure, asset position andcash flow. The statistical models, namely, Multiple DiscriminantAnalysis, Chi-square test and ‘t’-test have been used for this purpose.The details of such models have already been presented in chapter Iunder the methodology section.

Types of Respondents

As mentioned in chapter I under the methodology section (sampledesign), all the beneficiaries of Ennatien Moulethan Tchonnebat(EMT/AMRET) of two provinces, i.e., Kompong Speu and KompongChhnang, who have availed one-year loan, have beenconsidered as the treatment group members for the purpose of thestudy. In these two provinces the number of loans to householdsduring the years 2000 to 2004 numbered 191 and 62 respectively. InKompong Speu, 83 households received one-year loans and inKompong Chhnang, 51 households received one-year loans. Controlgroup members have been selected by the treatment members on thebasis of similar socio-economic characteristics of the treatmentmembers. Equal number of control group members as that oftreatment members in each province have been included in the study.

All beneficiaries of the one-year loans that responded to the per-sonal interview have been considered as the treatment group. Anequal number of control group members have been selected fromthose provinces which have not received loans from EnnatienMoulethan Tchonnebat or any other similar organizations or

Microfinance Institutions. After completion of the personal interviewwith a treatment group member, that member has been requested to recommend a neighbor of friend who is as close as possible to thetreatment member in type and size of business, and familycomposition that has not received a loan to be treated as a controlgroup member. Thus, the study has selected the control groupmembers on the basis of the recommendation given by the treatmentmembers. Table 4.1 shows the number of years of businessundertaken by both the treatment and control group members of theselected two provinces.

Table No. 4.1Distribution of Households on the basis of the Number of Years of

Business

Note: Figures in the parentheses indicate percentage to total.Source: Personal Survey.

Name of Province/Type of Members

Number of yearTotal

<5 5 to 10 11 to15 16 to20 <20Kampong SpeuTreatment Members

Control Members

27(33)16(19)

24(29)28(34)

8(10)12(14)

7(8)10(12)

17(20)17(20)

83(100)83(100)

Total 43(26)

52(31)

20(12)

17(10)

34(20)

166(100)

Kompong ChhnangTreatment Members

Control Members

11(22)9(18)

8(16)11`(22)

7(14)10(20)

8(16)7(14)

17(33)14(27)

51(100)51(100)

Total 20(20)

19(19)

17(17)

15(15)

31(30)

102(100)

TotalTreatment Member

Control Members

38(28)25(19)

32(24)39(29)

15(11)22(16)

15(11)17(13)

34(25)31(23)

134(100)134(100)

Grand Total 63(24)

71(26)

37(14)

32(12)

65(24)

268(100)


Table 4.1 reveals the fact that out of the 268 sample respondents,134 each belong to the treatment group and control group. Further, inKompong Speu the total number of sample respondents are 166 (83each beneficiaries and non-beneficiaries), whereas in KompongChhnang 102 (51 beneficiaries and non-beneficiaries) are the totalsample respondents. Out of the total respondents, the highestpercentage (26 percent) belongs to 5 to 10 years of businesscategory and the lowest percentage (12 percent) belongs to 16 to 20years of business category. An equal percentage, i.e. 24 percent of thesample respondents belong to less than 5 years and more than 20years of business category. In Kompong Speu, out of the totalrespondents, the highest 31 percent belongs to 5 to 10 years ofbusiness category, whereas the lowest 10 percent belongs to 16 to 20years of business category. In Kompong Chhnang, the highest 30percent respondents belongs to more than 20 years of businesscategory, whereas the lowest 15 percent belongs to 16 to 20 years ofbusiness category. With regard to treatment members, in KompongSpeu, the highest 33 percent belongs to less than 5 years of businesscategory, whereas in Kompong Chhnang, the highest 33 percentbelongs to more than 20 years of business category.

Considering the different types of business, the distribution ofsample respondents in both the provinces is presented in Table 4.2.The different types of business considered for classification areagriculture, trading, manufacturing, service and others.

Out of the total respondents, the highest 34 percent engaged intrading activities. In Kompong Speu, the highest 42 percentrespondents and in Kompong Chhnang, the highest 33 percentrespondents involved in the trading and agricultural activitiesrespectively. Moreover, with respect to the treatment members, inKompong Speu, the highest 34 percent engaged in trading activities,whereas in Kompong Chhnang, the highest 49 percent engaged inagricultural activities.

Microfinance and Beneficiaries 53

Table No. 4.2Distribution of Households on the basis of type of Business

Note: Figures in the parentheses indicate percentage to total.Source: Personal Survey

Statistical AnalysisI. Multiple Discriminant Analysis

In order to measure the difference between beneficiaries andnon-beneficiaries SPSS program has been used to closely analyze thevariables of beneficiaries and non-beneficiaries 12 months before and12 months after.

Computational Procedure


Type of Business

TotalAgriculture Commerce/

TradeManufauturing ServiceOthers

Kampong SpeuTreatment Members

Control Members

22(27)15(18)

28(34)35(42)

12(14)12(14)

19(23)19(23)

2(2)2(2)

83(100)83(100)

Total 37(22)

63(38)

24(14)

38(23)

4(2)

166(100)

Kompong ChhnangTreatment Members

Control Members

25(49)17(33)

13(25)13(27)

5(10)8(16)

5(10)10(20)

3(6)2(4)

51(100)51(100)

Total 42(41)

27(26)

13(13)

15(15)

5(5)

102(100)


Control Members

38(28)25(19)

32(24)39(29)

15(11)22(16)

15(11)17(13)

34(25)31(23)

134(100)134(100)

Grand Total 63(24)

71(26)

37(14)

32(12)

65(24)

268(100)


Because the research focused on the difference betweenbeneficiaries and non-beneficiaries, the figures calculated are Wilks´Lambda, significance, pooled within-groups matrices, canonicalcorrelation, chi-square, standardized canonical discriminant functioncoefficients, structure matrix, functions at group centroids, and priorprobabilities for groups membership.

Model

Zi = b1 * Investment 12 months before last 12 months + b2 *Investment last 12 months + b3 * Equipment 12 months before last 12months + b4 * Equipment last 12 months + b5 * Improving house 12months before last 12 months + b6 * Improving house last 12 months+ b7 * House equipment 12 months before last 12 months + b8 *House equipment last 12 months + b9 * Education expense 12 monthsbefore last 12 months + b10 * Education expense last 12 months + b11* Food expense 12 months before last 12 months + b12 * Foodexpense last 12 months + b13 * Health expense 12 months before last12 months + b14 * Health expense last 12 months + b15 * Saving 12months before last 12 months + b16 * Saving last 12 months + b17 *Ceremony expense 12 months before last 12 months + b18 *Ceremony expense last 12 months + b19 * Cash flow 12 monthsbefore last 12 months + b20 * Cash flow last 12 months + b21 *Revenues 12 months before last 12 months + b22 * Revenues last 12months.

InterpretationRandom 66 percent

When 66 percent (177) of the total number of respondents (268including 134 beneficiaries and 134 non-beneficiaries) are taken, wefind from the result that the Wilks’ Lambdas of the independentvariables, i.e., investment 12 months before last 12 months, improvinghouse 12 months before last 12 months, improving house last 12months and house equipment last 12 months are 0.979, 0.980, 0.958and 0.979 respectively. The F statistics show that all the four Wilks’Lambdas are significant at 10 percent level of significance. This shows


that there is significant difference between beneficiaries andnon-beneficiaries on the above four independent variables. Moreover,the overall Wilks’ Lambda is 0.805, which is significant at 5 percentlevel of significance. This indicates that there is significant differencebetween beneficiaries and non-beneficiaries across all the predictorvariables.

The classification results show that, out of 88 non-beneficiaries,77.3 percent and out of 89 beneficiaries, 67.4 percent are classifiedcorrectly and, of the total sample of 177, 72.3 percent cases areclassified correctly.

Random 72 percent

When 72 percent (193) of the total number of respondents (268including 134 beneficiaries and 134 non-beneficiaries) are taken, wefind from the result that the Wilks’ Lambdas of the independentvariables, i.e., improving house last 12 months and health expenselast 12 months are 0.954 and 0.983 respectively. The F statistics showthat all the two Wilks’ Lambdas are significant at 10 percent level ofsignificance. This shows that there is significant difference betweenbeneficiaries and non-beneficiaries on the above two independentvariables. Moreover, the overall Wilks’ Lambda is 0.808, which issignificant at 5 percent level of significance. This indicates that there issignificant difference between beneficiaries and non-beneficiariesacross all the predictor variables.

The classification results show that, out of 99 non-beneficiaries,69.1 percent and out of 99 beneficiaries, 64.6 percent are classifiedcorrectly, and of the total sample of 193, 66.3 percent cases areclassified correctly.

Random 75 percent

When 75 percent (201) of the total number of respondents (268including 134 beneficiaries and 134 non-beneficiaries) are taken, wefind from the result that the Wilks’ Lambdas of the independent


variables, i.e., improving house 12 months before last 12 months,improving house last 12 months, house equipment last 12 months andhealth expense last 12 months are 0.982, 0.971, 0.976 and 0.973respectively. The F statistics show that all the four Wilks’ Lambdas aresignificant at 10 percent level of significance. This shows that there issignificant difference between beneficiaries and non-beneficiaries onthe above four independent variables. Moreover, the overall Wilks’Lambda is 0.766, which is significant at 5 percent level of significance.This indicates that there is significant difference between beneficiariesand non-beneficiaries across all the predictor variables.

The classification results show that, 80.0 percent of 101non-beneficiaries and 65.3 percent of 101 beneficiaries are classifiedcorrectly and, of the total sample of 201, 72.6 percent cases areclassified correctly.

Random 80 percent

When 80 percent (214) of the total number of respondents (268including 134 beneficiaries and 134 non-beneficiaries) are taken, wefind from the result that the Wilks’ Lambdas of the independentvariables, i.e., improving house 12 months before last 12 months,improving house last 12 months, house equipment last 12 months andhealth expense last 12 months are 0.977, 0.976, 0.986 and 0.984respectively. The F statistics show that all the four Wilks’ Lambdas aresignificant at 10 percent level of significance. This shows that there issignificant difference between beneficiaries and non-beneficiaries onabove four independent variables. Moreover, the overall Wilks’Lambda is 0.839, which is significant at 5 percent level of significance.This indicates that there is significant difference between beneficiariesand non-beneficiaries across all the predictor variables.



Random 81 percent

When 81 percent (217) of the total number of respondents (268including 134 beneficiaries and 134 non-beneficiaries) are taken, wefind from the result that the Wilks’ Lambdas of the independentvariables, i.e., improving house last 12 months, house equipment last12 months and health expense last 12 months are 0.958, 0.983 and0.980 respectively. The F statistics show that all the three Wilks’Lambdas are significant at 10 percent level of significance. This showsthat there is significant difference between beneficiaries and non-beneficiaries on above three independent variables. Moreover, theoverall Wilks’ Lambda is 0.807, which is significant at 5 percent levelof significance. This indicates that there is significant differencebetween beneficiaries and non-beneficiaries across all the predictorvariables.

The classification results show that, out of 106 non-beneficiaries, 64.2 percent and out of 111 beneficiaries, 74.8 percentare classified correctly and, of the total sample of 217, 69.6 percentcases are classified correctly.

Random 86 percent

When 86 percent (230) of the total number of respondents (268including 134 beneficiaries and 134 non-beneficiaries) are taken, wefind from the result that the Wilks’ Lambdas of the independentvariables, i.e., improving house 12 months before last 12 months,improving house last 12 months, and health expense last 12 monthsare 0.985, 0.968 and 0.974 respectively. The F statistics show that allthe four Wilks’ Lambdas are significant at 10 percent level ofsignificance. This shows that there is significant difference betweenbeneficiaries and non-beneficiaries on the above three independentvariables. Moreover, the overall Wilks’ Lambda is 0.830, which issignificant at 5 percent level of significance. This indicates that there issignificant difference between beneficiaries and non-beneficiariesacross all the predictor variables.



Random 92 percent

When 92 percent (247) of the total number of respondents (268including 134 beneficiaries and 134 non-beneficiaries) are taken, wefind from the result that the Wilks’ Lambdas of the independentvariables, i.e., improving house last 12 months and health expenselast 12 months are 0.965 and 0.983 respectively. The F statistics showthat all the two Wilks’ Lambdas are significant at 10 percent level ofsignificance. This shows that there is significant difference betweenbeneficiaries and non-beneficiaries on above two independentvariables. Moreover, the overall Wilks’ Lambda is 0.829, which issignificant at 5 percent level of significance. This indicates that there issignificant difference between beneficiaries and non-beneficiariesacross all the predictor variables.


Random 100 percent

When 100 percent (268) of the total number of respondents aretaken, we find from the result that the Wilks’ Lambdas of theindependent variables, i.e., improving house 12 months before last 12months, improving house last 12 months, house equipment last 12months and health expense last 12 months are 0.987, 0.965, 0.983and 0.980 respectively. The F statistics show that all the four Wilks’Lambdas are significant at 10 percent level of significance. This showsthat there is significant difference between beneficiaries and non-beneficiaries on above four independent variables. Moreover, theoverall Wilks’ Lambda is 0.876, which is significant at 5 percent level


of significance. This indicates that there is significant differencebetween beneficiaries and non-beneficiaries across all the predictorvariables.


Average

After calculating the average of the eight randoms, the Wilks’Lambdas of the three independent variables, namely, improving houselast 12 months, house equipment last 12 months and healthexpenses last 12 months are 0.964, 0.985 and 0.981 respectively. TheF statistics show that all the three Wilks’ Lambdas are significant at 10percent level of significance. This shows that there is significantdifference between beneficiaries and non-beneficiaries on the abovethree independent variables. Moreover, the overall Wilks’ Lambda is0.823, which is significant at 5 percent level of significance. Thisindicates that there is significant difference between beneficiaries andnon-beneficiaries across all the predictor variables.

Moreover, 70.84 percent of the non-beneficiaries and 67.6 percentof the beneficiaries are correctly classified. Of the total sample of 268,69.14 percent cases are classified correctly.

Conclusion

As shown in the result, we conclude that the beneficiaries andnon-beneficiaries had significant discriminate in case of threepredictor variables, i.e., improving house last 12 months, houseequipment last 12 months and health expenses last 12 months.Among the three independent variables, we see that one variable,house equipment last 12 months, which was different and its averageexpenditure on house equipment last 12 months of beneficiaries wasgreater than that of the non-beneficiaries, while the average


expenditure of non-beneficiaries on the improving house last 12months and health expenses last 12 months were higher compared tobeneficiaries. On the average, there is significant difference betweenbeneficiaries and non- beneficiaries in asset position, cash flow,expenditure and income.

II. ‘t’-Test

To know the significance of difference between the two samplemeans, ‘t’ test has been used with the help of SPSS program.

Computational Procedure

With independent samples, the ‘t’ statistic is calculated by dividingthe difference between the sample means by an estimate of thestandard deviation of the distribution of differences.

Investment in Equipment

With regard to the investment in equipment by both thebeneficiaries and non-beneficiaries, a comparative analysis is donebelow.

Table No. 4.3Comparative Results of Investment in Equipment between

Beneficiaries and Non-Beneficiaries


Have you takerLoan from EMT N Mean Std. Deviation

Std. ErrorMean

Equipment last 12 Nomonths Yes

134

134

085891.79

708,134.33

345,658.917

063,156.152

61,794.595

91,842.703

The above result shows that the mean investment on equipment ofnon-beneficiaries is 1,085,891 riels and of beneficiaries is 708,134riels, but the standard deviation of non-beneficiaries is 5,345,658 riels,while the standard deviation of beneficiaries is 1,063,156 riels.

Based on the above condition, we set:

It is found from the result that the calculated value of ‘t’(t = 0.802) is in the acceptance region at 95 percent confidence level.This implies that the null hypothesis (Ho) is not rejected. In otherwords, there is no significant difference between the investmentexpenditures on equipment of the beneficiaries and non-beneficiaries.

Improving House

Considering the expenditure on improving house betweenbeneficiaries and non-beneficiaries is concerned, the comparativeresults are presented in Table 4.4.

Equipment last12 months

Equal variancesassumed

t-test for Equality tMeans df

Sig.(2-tailed)Mean Difference

Std. Error Difference

95% Confidence Interval Lowerof the Difference Upper

.802 266.423

377,757.46

470,838.964

-549,287.8851,304,802.811


Table No. 4.4Comparative Results of Expenditure on Improving House between


For improving house, the mean expenditure 659,227 riels and1,784,328 riels are for beneficiaries and non-beneficiariesrespectively, while the respective standard deviations are 1,366,431riels and 3,957,359 riels.

The two hypotheses we set are:

The result shows that the calculated value of ‘t’ (t = 3.111) is in therejection region at 95 percent confidence level. So, the nullhypothesis is rejected. This indicates that there is significant differencebetween the expenditures on improving the houses of beneficiariesand non-beneficiaries.


Std. ErrorMean

Improving house Nolast 12 months Yes

134

134

784,328.36

659,227.61

957,359.271

366,431.996

841,863.772

118,041.746

Improving houselast 12 months






3.111266.002

1,125,100.75

361,669.314

413,001.9601,837,199.532


Educational Expenses

A comparative analysis of educational expenses betweenbeneficiaries and non-beneficiaries is presented in Table 4.5.

Table No. 4.5Comparative Results of Educational Expenses between Beneficiaries

and Non-Beneficiaries

It is found that the mean expenditure on education ofnon-b eneficiaries is 519,070.90 riels and of beneficiaries is582,170.90 riels, but the standard deviation of non-beneficiaries is662,606.13 riels while the standard deviation of beneficiaries is759,342.43 riels.


It is found from the result that the calculated value of ‘t’(t = -0.725) is in the acceptance region at 95 percent confidence level.


Std. ErrorMean

Education expense Nolast 12 months Yes

134

134

519,070.90

582,170.90

662,606.113

759,342.438

57,240.450

65,597.196

Education expenseslast 12 months






-.725 266.469

-63,100.00

87,060.101

-234,514.576108,314.576


This implies that the null hypothesis ( Ho) is not rejected. In otherwords, there is no significant difference between the educationexpenditures of the beneficiaries and non-beneficiaries.

Food Expenses

With regard to the food expenses of beneficiaries andnon-beneficiaries, the comparative result is shown in Table 4.6.

Table No. 4.6Comparative Results of Food Expenses between Beneficiaries and

Non-Beneficiaries

The result shows that the mean food expenses of non-beneficiariesis 1,949,141.79 riels and of beneficiaries is 1,871,063.43 riels, but thestandard deviation for non-beneficiaries is 1,517,945.23 riels while thestandard deviation for beneficiaries is 968,528.62 riels.




Std. ErrorMean

Food expense Nolast 12 months Yes

134

134

1949141.79

1871063.43

517,945.228

968,528.619

131,130.495

83,668.129

Food expenseslast 12 months






.502266.616

78,078.36

155,549.229

-228,185.992384,342.708

It is found from the result that the calculated value of ‘t’(t = 0.502) is in the acceptance region at 95 percent confidence level.This implies that the null hypothesis ( Ho) is not rejected. In otherwords, there is no significant difference between the food expendituresof the beneficiaries and non-beneficiaries.

Health Expenses

Taking into account the expenses made on health betweenbeneficiaries and non-beneficiaries, a comparative analysis is made inTable 4.7.

Table No. 4.7Comparative Results of Health Expenses between Beneficiaries and

Non-Beneficiaries

For health expenditure, the mean expenditures 308,970.15 rielsand 485,776.12 riels are for beneficiaries and non-beneficiariesrespectively, while the respective standard deviations are 417,134.64riels and 780,397.64 riels.


Std. ErrorMean

Health expenses Nolast 12 months Yes

134

134

485,776.12

308,970.15

780,397.649

417,134.644

67,416.089

36,034.945

Healthexpenses last






2.313266.021

176,805.97

76,442.438

26,296.748327,315.192



The result mentioned above shows that the calculated value of ‘t’ (t= 2.313) is in the rejection region at 95 percent confidence level. So,the null hypothesis is rejected. This indicates that there is significantdifference between the health expenditures of beneficiaries andnon-beneficiaries, and the mean health expenditure of beneficiaries isless than that of non-beneficiaries.

Saving

Considering the savings done by both the beneficiaries and non-beneficiaries, the comparative results are shown in Table 4.8.

Table No. 4.8Comparative Results of Saving between Beneficiaries and Non-

Beneficiaries



Std. ErrorMean

Saving last 12 months NoYes

134

134

,271,268.66

,250,376.87

236,584.457

787,285.002

98,211.469

54,397.908

Savinglast 12 months






.084266.933

20,891.79

247,324.455

-466,070.849507,854.431

The result shows that the mean saving of non-beneficiaries is1,271,268.66 riels and of beneficiaries is 1,250,376.87 riels, but thestandard deviation of non-beneficiaries is 2,236,584.45 riels while thestandard deviation of beneficiaries is 1,787,285.00 riels.


It is found from the result that the calculated value of ‘t’ (t = 0.084)is in the acceptance region at 95 percent confidence level. This impliesthat the null hypothesis (Ho) is not rejected. In other words, there is nosignificant difference between the mean saving of the beneficiariesand non-beneficiaries.

Ceremonial Expenses

The comparative analysis on expenses made on ceremony bybeneficiaries and non-beneficiaries is provided in Table 4.9.

Table No. 4.9Comparative Results of Expenses on Ceremony between Beneficiaries

and Non-BeneficiariesHave you takerLoan from EMT N Mean Std. Deviation

Std. ErrorMean

Ceremony expence NoYes

134

134

519,746.27

,514,179.10

426,313.572

426,258.947

36,741.497

36,823.165Ceremony

expenses lastEqual variances

assumedt-test for Equality tMeans df




.107266.915

5,567.16

52,018.103

-96,852.440107,986.768


The result shows that the mean ceremony expenses of non-beneficiaries is 519,746.27 riels and of beneficiaries is 514,179.10riels, but the standard deviation of non-beneficiaries is 425,313.57 rielswhile the standard deviation of beneficiaries is 426,258.94 riels.


It is found from the result that the calculated value of ‘t’ (t = 0.107)is in the acceptance region at 95 percent confidence level. This impliesthat the null hypothesis ( Ho) is not rejected. In other words, there isno significant difference between the ceremony expenses of thebeneficiaries and non-beneficiaries.

Cash Flow Per day

With regard to the daily cash flow between beneficiaries and non-beneficiaries, the comparative analysis is made in Table 4.10.

Table No. 4.10Comparative Results of Daily Cash Flow between Beneficiaries and

Non-Beneficiaries



Std. ErrorMean

Cash flow per day Nolast 12 months Yes

134

134

135,966.42

269,241.04

486,345.414

,918,596.806

42,013.845

65,741.520Cash flow per

day last 12Equal variances





-.779266.436

-133,274.63

170,983.668

-469,928.188203,378.934

The result shows that the mean cash flow per day of non-beneficiaries is 135,966.42 riels and of beneficiaries is 269,241.04riels, but the standard deviation of non-beneficiaries is 486,345.41 rielswhile the standard deviation of beneficiaries is 1,918,596.80 riels.


It is found from the result that the calculated value of ‘t’ (t = -0.779)is in the acceptance region at 95 percent confidence level. This impliesthat the null hypothesis ( Ho) is not rejected. In other words, there isno significant difference between the cash flow per day of thebeneficiaries and non-beneficiaries.

Revenues

Considering the revenues generated by both the beneficiaries andnon-beneficiaries, the Table 4.11 shows the comparative result.

Table No. 4.11Comparative Results of Revenues between Beneficiaries and

Non-Beneficiaries



Std. ErrorMean

Revenues Nolast 12 months Yes

134

134

989,267.91

948,231.34

244,846.876

221,176.427

89,727.872

33,230.427

Renenueslast 12 months






-1.253266.211

-2,958,963.43

2,362,207.216

-7,609,965.9541,692,039.089

The result shows that the mean revenue of non-beneficiaries is10,989,267.91 riels and of beneficiaries is 13,948,231.34 riels, but thestandard deviation of non-beneficiaries is 17,244,846.87 riels while thestandard deviation of beneficiaries is 21,221,176.42 riels.


It is found from the result that the calculated value of ‘t’ (t = -1.253) is in theacceptance region at 95 percent confidence level. This implies that the nullhypothesis ( Ho) is not rejected. In other words, there is no significant differencebetween the revenues of the beneficiaries and non-beneficiaries.

Investment

The investment made by both beneficiaries and non-beneficiaries iscompared and results are shown in Table 4.12.

Table No. 4.12Comparative Results of Investment between Beneficiaries and

Non-Beneficiaries



Std. ErrorMean

Investment Nolast 12 months Yes

134

134

1431798.51

1674817.16

,064,499.012

,722,912.349

264,732.394

148,836.958

Investment last 12 months






-.800266.424

-243,018.66

303,703.277

-840,986.818354,949.505

The result shows that the mean investment of non-beneficiaries is1,431,798.51 riels and of beneficiaries is 1,674,817.16 riels, but thestandard deviation of non-beneficiaries is 3,064,499.01 riels while thestandard deviation of beneficiaries is 1,722,912.34 riels.

Based on the above condition, we set:It is found from the result that the calculated value of ‘t’ (t = -0.800)

is in the acceptance region at 95 percent confidence level. This impliesthat the null hypothesis (Ho) is not rejected. In other words, there is nosignificant difference between the investment of the beneficiaries andnon-beneficiaries.

House Equipment

The comparative analysis with regard to investment in houseequipment between beneficiaries and non-beneficiaries is presentedin Table 4.13.

Table No. 4.13Comparative Results of Investment in House Equipment between




Std. ErrorMean

House equipment Nolast 12 months Yes

134

134

346,001.87

555,597.01

718,533.053

885,693.368

89,727.872

33,230.427House

Equipment lastEqual variances





-2.127266.034

-209,595.15

98,524.279

-403,581.801-15,608.497

For investment on house equipment, the mean investment is555,597.01 riels for beneficiaries and 346,001.87 riels for non-beneficiaries while the respective standard deviations are 885,693.36riels and 718,533.05 riels.


The result mentioned above shows that the calculated value of ‘t’(t = -2.127) is in the rejection region at 95 percent confidence level. So,the null hypothesis is rejected. This indicates that there is significantdifference between the investment on house equipment ofbeneficiaries and non-beneficiaries. Further, mean investment onhouse equipment of the beneficiaries is more

III. Chi-Square Test

The income categories of beneficiaries 12 months before loan and12 months after loan, in which there are 7 categories, arepresented in Table 4.14.

Table No. 4.14Distribution of Income of Beneficiaries Before and After the Loan


Incomes

Riels

12monthsafter loan

Oi

12monthsbefore loan

EiOi - Ei (Oi-Ei)2/Ei

<2,000,0002,000,000-4,000,0004,000,001-6,000,0006,000,001-8,000,0008,000,001-10,000,00010,000,001-12,000,000>12,000,000

1526251674

41

204417978

29

-5-18870-412

1.257.363.765.44

-2.004.97

Total 134 134 æ2= 24.79

Ho: Distribution of income of beneficiaries after 12 months loan issimilar to 12 months before loan.

H1: Distribution of income of beneficiaries after 12 months loan isdifferent from 12 months before loan.

It is found that the calculated value of x2 is 24.79. But the tablevalue of x2 at 5 percent significance level and 6 degrees of freedom(number of categories – 1 ) is 12.59. Thus, the calculated value of x2

is greater than the table value of X2, which is in the rejection region.So, the null hypothesis is rejected. This implies that there is significantchange in the distribution of income of the beneficiaries 12 monthsbefore getting the loan and 12 months after getting the loan. Further,number of beneficiaries is found to be more in the lower incomecategories 12 months before getting the loan and, 12 months aftergetting the loan, the number of beneficiaries in the higher incomecategories is more.

The expenditure of the beneficiaries 12 months after availing theloan and 12 months before availing the loan is presented in Table 4.15.

Table No. 4.15Distribution of Expenditure of Beneficiaries Before and After the Loan

Note: It includes expenditures on food, education, health, and ceremonies.

Microfinance and Rural Development in Cambodia 74

ExpensesclassRiels

12monthsafter loan

Oi

12monthsbefore loan


<1,000,0001,000,000-2,000,0002,000,001-3,000,0003,000,001-4,000,0004,000,001-5,000,0005,000,001-6,000,000>6,000,000

720393515108

73038341546

0-1011062

-3.330.030.03

-9.000.67

Total 134 134 æ2= 13.06

Ho: Distribution of expenditure of beneficiaries 12 months beforeloan is similar to 12 months after loan.

H1: Distribution of expenditure of beneficiaries 12 months beforeloan is different from 12 months before loan.

From the Chi-square distribution table, we can see that, at a 0.05and df = 6, the Critical Value of x2 is 12.59, so the calculated value ofx2 13.06 is in the rejection region and null hypothesis is rejected at5 percent significance level.

This implies that expenditure distribution of the beneficiaries 12months after availing the loan and 12 months before availing the loanhas changed significantly. It is also observed that the number ofbeneficiaries in the lower expenditure categories is more 12 monthsbefore getting the loan and, after getting the loan, more number ofbeneficiaries is found in the higher expenditure categories.

The distribution of the assets position of the beneficiaries 12months after availing the loan and before availing the loan ispresented in Table 4.16.

Table No. 4.16Distribution of Asset Position of Beneficiaries Before and After the

Loan

Note: It includes assets position such as investment or equipment, houseequipment, improving house and saving.


Asset PositionClassRiels

12monthsafter loan

Oi

12monthsbefore loan


<1,000,0001,000,000-2,000,0002,000,001-3,000,0003,000,001-4,000,0004,000,001-5,000,0005,000,001-6,000,000>6,000,000

7192921121135

15393113102

24

-8-20-282911

4.2710.260.134.920.40

40.505.04

Total 134 134 æ2= 65.52

Ho: Distribution of asset position of beneficiaries after 12 monthsloan is similar to 12 months before loan.

H1: Distribution of asset position of beneficiaries after 12 monthsloan is different from 12 months before loan.

It is found that the calculated value of x2 is 65.52. But the tablevalue of x2 at 5 percent significance level and 6 degrees of freedom(number of categories – 1) is 12.59. Thus the calculated value of x2 isgreater than the table value of ÷2 and it is in the rejection region. So,the null hypothesis is rejected. This implies that there is significantchange in the distribution of assets position of the beneficiaries 12months before getting the loan and 12 months after getting the loan. Inthe lower categories of asset position, more number of beneficiaries isfound 12 months before availing the loan but 12 months after availingthe loan, more number of beneficiaries is found in the highercategories of asset position.

The cash flow distribution of the beneficiaries 12 months afteravailing the loan and before availing the loan is presented in Table4.17.

Table No. 4.17Distribution of Daily Cash Flow of Beneficiaries Before and After the

Loan


Cash Flow

Riels

12monthsafter loan

Oi

12monthsbefore loan


<10,00010,000-20,00020,001-30,00030,001-40,00040,000-50,00050,000-60,000>60,000

264115517

39

42389966

24

-1636-4-51

15

6.100.244.001.784.170.179.38

Total 134 134 æ2= 25.82

Ho: Distribution of daily cash flow of beneficiaries after 12 monthsloan is similar to 12 months before loan.

H1: Distribution of daily cash flow of beneficiaries after 12 monthsloan is different from 12 months before loan.

From the Chi-square distribution table, we can see that, at a = 0.05and df = 6, the Critical Value of x2 is 12.59, so the calculated value ofx2 25.82 is in the rejection region and null hypothesis is re jected at 5percent significance level.

This implies that cash flow distribution of the beneficiaries 12months after availing the loan and before availing the loan haschanged significantly. Further, before availing the loan, more numberof beneficiaries is found in the lower categories of cash flow and, in thehigher categories of cash flow, the number of beneficiaries is more 12months after availing the loan.

Main Findings

To sum up, the study has used three models, such as MultipleDiscriminant Analysis, Chi-Square and ‘t’-test to assess the statisticalsignificance between the development loan members and the controlgroup members with respect to cash flow, expenditure, asset positionand income and within the developmental loan members before andafter the availing of loan with respect to the cash flow, expenditure,asset position and income in businesses and households.

The analysis shows that there is significant increase in cash flow,expenditure, asset position and income of the households within thedevelopmental loan members after the availing of loan from theMicrofinance Institution, i.e. (EMT/AMRET). Among developmentalloan members and control group members, there is significantdifference in expenditure, cash flow, income and asset position.

Thus, the hypotheses of the study show that:


(i) The null hypothesis (Ho 1), there is no statistically significantdifference in the cash flow between development loan members andthe control group members, is rejected.

(ii) The null hypothesis (Ho 2), there is no statistically significantdifference in the total income between development loan membersand the control group members, is rejected.

iii) The null hypothesis (Ho 3), there is no statistically significantdifference in the level of expenditure between development loanmembers and the control group members, is rejected.

(iv) The null hypothesis (Ho 4), there is no statistically significantdifference in the value of asset position between development loanmembers and the control group members, is rejected.

(v) The null hypothesis (Ho 5), there is no statistically significantdifference in the value of the asset position, expenditure, cash flowand income within development loan members before and after theloan, is rejected; and there is no statistically significance differencebetween development loan members and the control group members,is rejected.

Thus, this reveals that there is statistically significant differencebetween the development loan members and the control groupmembers with respect to cash flow, income, asset position andexpenditure and there is also statistically significant difference in cashflow, income, asset position and expenditure among the developmentloan members before and after availing the loan.


V

Summary and Conclusion

The objective of this chapter is to present the summary of thediscussions pursued in the preceding chapters, highlight the majorfindings of the study and to suggest policy recommendations for theoverall development of microfinance sector in the country as a whole.

Summary of Discussions

The study broadly covers five chapters. The first chapter is anintroductory one. It deals with background, scope, objectives,hypotheses, and methodology of the study. Besides, it also points outseveral limitations confining the study. The objectives set for the studymainly seek to answer the following issues: (a) to what extent thecredit supplied by the MFIs has helped to increase the standard ofliving of the beneficiaries, and (b) to examine the role played by theMFIs in reducing poverty in general and of beneficiaries in particular.

For the purpose of the study, at first two provinces, i.e., KompongSpeu and Kompong Chhnang have been selected on the basis of theirlevel of development. All beneficiaries of one year loans of EMT(AMRET) during 2000 to 2004 in both the provinces have beenselected as treatment group members, whereas, an equal number ofcontrol group members who did not receive loans from any MFIsincluding EMT (AMRET) but having same type and size of businessand family composition have been selected for the purpose of thestudy. Further, the selection of non-beneficiaries (control groupmembers) have been done on the basis of purposive sampling with thehelp of beneficiaries (treatment group members). The study, therefore,is more comprehensive in nature.

The second chapter deals with the process of institutionalization offinance in Cambodia. The discussion in the chapter clearly revealsthat, although the number of loans from MFIs and NGOs hasexpanded considerably during the recent years, but however, loansfrom moneylenders, relatives and friends continue to be an importantsource of rural credit. Further, the Royal Government of Cambodiaprovides a supportive and appropriate institutional framework for theestablishment of a viable and sustainable microfinancial market in thecountry, keeping in view the role of the sector towards povertyreduction policy of the Government.

In the third chapter, the Cambodian banking system has beenpresented and along with, the cases of some selected microfinanceoperators have been highlighted. It is revealed from the discussionsthat the Cambodia’s financial sector is at a rudimentary state and dueto the limited operation of commercial banks, the main providers offinancial services in rural areas, particularly on rural credit, are themicrofinance institutions. Appropriate support, particularly from RoyalGovernment of Cambodia has brought international investors andcreditors with support of equity investment, refinancing sources, aswell as technical expertise to the fledgling microfinance industry in thecountry. Critical support from the National Bank of Cambodia as aregulator has created an enabling regulatory environment andmechanisms to allow MFIs to grow rapidly during the recent years. Assuch, the study found that more and more NGOs have acquiredlicenses and transformed themselves into licensed MFIs to meet thegrowing demand of microfinance services in the country. Further,considering the cases of some microfinance operators, it is revealedthat most of them have been utilizing external funds, such as foreignaid and borrowing in their business operations as a major source offunds. This implies that the excessive reliance on external financing ismainly attributable to lack of savings and good saving services.

The fourth chapter deals with the impact of micro credit on thestandard of living of beneficiaries in terms of income, expenditure,asset position and cash flow. Moreover, a comparative analysis hasbeen made between the beneficiaries and the non-beneficiaries on the


above aspects to understand the positive contribution of micro crediton the standard of living of the beneficiaries.

In the concluding chapter, major findings of the study have beendiscussed. On the basis of the findings a number of policyrecomm endations has been suggested for the overall development ofthe microfinance sector in Cambodia.

Major Findings

The major findings of the study are as follows:

(i) With the support of Multiple Discriminant Analysis it is revealedfrom the study that the beneficiaries and non-beneficiarieshave significant discriminate in case of improving house last 12months, house equipment last 12 months and healthexpenses last 12 months. The average expenditure ofbeneficiaries on house equipment last 12 months was highercompared to non-beneficiaries. Further, on the average, thereis significant difference between beneficiaries and non-beneficiaries in asset position, cash flow, expenditure andincome.

(ii) On the basis of ‘t’ test the study found out the following:

(a) So far investment expenditures on equipment are concernedthere does not exist any significant difference betweenthebenefi ciaries and non-beneficiaries.

(b) With regard to expenditure on house improvement, there existssignificant difference between the beneficiaries and non-beneficiaries.

(c) In respect of expenditure on education, there does not existany significant difference between the beneficiaries andnon-bene ficiaries.

Summary and Conclusion 81

(d) There does not exist any significant difference between thefood expenditures of the beneficiaries and non-beneficiaries.

(e) Considering the expenditure on health services, significantdifferences exist between beneficiaries and non-beneficiariesand the mean health expenditure of beneficiaries is less thanthat of non-b eneficiaries.

(f) No significant difference exists between the mean saving of thebeneficiaries and non-beneficiaries.

(g) With regard to expenses made on ceremonies, no significantdifference between the beneficiaries and non-beneficiaries isrevealed.

(h) No significant difference between the beneficiaries andnon-beneficiaries is found so far cash flow per day is conerned

.(i) There exists significant difference between the

beneficiaries and non-beneficiaries with regard to thegeneration of revenues from business.

(j) Considering the investment made by both beneficiaries andnon-beneficiaries, there is no significant differencebetween them.

(k) With regard to the investment on house equipment, thereexists significant difference between beneficiaries andnon-beneficiaries and also the mean investment on houseequipment of thebeneficiaries is more compared to that ofnon-beneficiaries.

(iii) With the help of Chi-square test, the following findings havebeen revealed.

(a) There is a significant change in the distribution of income of thebeneficiaries 12 months before getting the loan and 12 months


after getting the loan. Further, while the number ofbeneficiaries is more in the lower income categories 12 monthsbefore getting the loan, their number in the higher incomecategories is found to be more 12 months after getting the loan.

(b) Expenditure distribution of the beneficiaries 12 months afteravailing the loan and 12 months before availing the loanhaschanged significantly. Moreover, the number ofbeneficiaries in the lower expenditure categories is more 12months before getting the loan, whereas, their number is foundto be more in higher expenditure categories after 12 months ofgetting the loan.

(c) There is a significant change in the distribution of assetsposition of the beneficiaries 12 months before getting the loanand 12 months after getting the loan. While more number ofbeneficiaries is found in the lower categories of asset position12 months before av ailing the loan, more number ofbeneficiaries is found in the higher categories of asset position12 months after availing the loan.

(d) Cash flow distribution of the beneficiaries 12 months afteravailing the loan and before availing the loan has changedsignificantly. More number of beneficiaries is found in the lowercategories of cash flow before 12 months of availing the loan,whereas, 12 months after availing the loan the number ofbeneficiaries is more in the higher categories of cash flow.

Thus on the basis of the above findings, all the null hypotheses setbefore the study have been rejected. In other words, there isstatistically significant difference between the treatment groupmembers (beneficiaries) and control group members (non-beneficiaries) with regard to cash flow, income, asset position andexpenditure and also, there is statistically significant difference in cashflow, income, asset position and expenditure among the treatmentgroup members before and after availing the micro credit.


Policy Recommendations

On the basis of the above findings, the following recommendationsare made to develop the microfinance sector on one hand and toimprove the operations of MFIs on the other hand in Cambodia.

(i) The need of microfinance in Cambodia is very important as itis the sole means of allowing farmers to access to credit withreasonable interest rates. Therefore, to establish a viable andsustainable private microfinancial market in the country,the Royal Government of Cambodia along with NBC shouldcontinue in providing the supportive and appropriateinstitutional framework to the market. Thus, the authoritiesneed to establish a favorable regulatory and policyenvironment for a range of institutions dedicated for the causeof the poor.

(ii) Today in addition to the farm activities, people haveturned to other businesses, such as small trade, services,production, etc., which have resulted for them to becomeentrepreneurs. These activities require some additional capital,which partly is met by the MFIs. As economies of scale arelikely to bring about improved and sustained profitabilityto MFIs, therefore, expanding the network of microfinance inrural areas is critical which deserves special attention from theservice providers .Thus the microfinance operators shouldneed to develop organizational strength and improve thequality of services and outreach along with promotion of quickand convenient access to credit.

(iii) It is realized that MFIs have lack of sufficient resources forundertaking lending operations. Therefore, assistance frombilateral and multilateral agencies need to continue for thetime-being but it must be designed appropriately in order toenhance self-sustainability of local service providers.

(iv) Though access to credit by the poor people in rural areas is an


essential issue but at the same time, the problem of cost ofcredit is considered to be equally important which needsproper attention. Today, due to improved regulatory andoperational environment along with increased involvement ofdonors in a more efficient way, the interest rates have gonedown but still it is considered to be high from the point of viewof the borrowers. Thus in the wider interest of the poor people,measures in the direction of reducing interest rates further to alower level may be considered.

(v) It is beyond doubt to understand that a large number of MFIsare dependent on external funds, such as foreign aid andborrowings. The excessive reliance on external financing isprimarily attributable to lack of adequate savings and goodsavings services. In this context, proper strategies arenecessary to be taken by the MFIs to mobilize savingsproducts resp onsive to the needs of the prospective clients.Along with the same, for maintaining the trust and confidenceof the people, authorities need to emphasize the monitoringand supervision of MFIs activities. This will ensure a morestable domestic resource base for the growth andsustainability of the lending operations of MFIs.

(vi) As Cambodian microfinance sector is at the expansion andvelopmental phase, bilateral and multilateral agencies,particularly their equity participation is crucial which brings bothfinancial benefits and technical expertise to the institutions,thus they should be encouraged in this direction.

(vii) It is found from the study that the MFIs in Cambodia arecontributing significantly for the improvement of the standard ofliving of the beneficiaries and thereby alleviation of poverty. Tofurther strengthen their position, it is recommended thatregulatory authorities and supporting agencies should identifythe problems and constraints faced by the MFIs and takenecessary steps in the removal of the same.


To-day, in the Cambodian environment, microfinance programs andinstitutions have become an increasingly important component ofstrategies to reduce poverty and promote micro and small enterprisedevelopment. Microfinance programs are one of the most importantinterventions in the efforts of Cambodia to reduce poverty. As we haveseen in recent years, the growth of the sector has taken place in termsof number and size of organizations, number of clients and externalfunding. However, at the most basic level there is a need tounderstand and improve the impact of MFIs as a key premise tosuccessful poverty reduction in Cambodia.


Appendices

Appendix – 1.1List of Districts and Communes of Kampong Speu Province

Name of Districts Name of Communes Name of Districts Name of Communes

Basedth

Basedth

Kong Pisei

Prey Nheat

Kat Phluk Prey Vihear

Nitean Rka Kaoh

Pheakdei Sdok

Pheari Mean Chey Snam Krapeu

Phong Srang

Pou Angkrang Tuek L’ak

Pou Chamraeun Veal

Pou Mreal

Aoral

Haong Samnam

Svay Chaceb Reaksmei Sameakki

Toul Ampil Trapeang Chour

Toul Sala Sangkara Satob

Kak Ta Sal

Svay Rumpea

Odongk

Chant Saen

Preah Khae Cheung Roas

Chbar Mon

Chbar Mon Chumpu Proeks

Kandaol Dom Khsem Khsan

Roka Thum Krang Chek

Sopoar Tep Mean Chey

Svay Kravan Preah Srae

Kong Pisei

Angk Popel Prey Krasang

Chongruk Trach Tong

Moha Ruessei Veal Pung

Pechr Muni Veang Chas

Preah Nipean Yutth Sameakki


Appendix – 1.1 Continued


OdongkDamnak Reang

Samraong Tong

PneayPeang Lvea Roleang KreulPhnum Touch Samraong Tong

Phnum Sruoch

Chambak SambourChoam Sangkae Saen DeiDamvouk Rung SkuhKiri Voan Tang KrouchKrang Dei Vay Thommoda ArMoha Sang Trapeang KongOu Tumpoar MeasPrey Rumduol Voa SaPrey Kmeang

Thpong

AmleangTang Samraong MonouromTang Sya Pramvei MomTraeng Trayueng Rung Roeang

Samraong Tong

Roleang Chak Veal PonKahaeng Toap Mean

Khtum Kuang Yea AngkKrang Ampil

Appendices 89

Appendix- 1.2List of Districts and Communes of Kampong Chhnang Province


Baribour

Anhchanh Rung

Kampong Leaeng

Samraong Saen

Chhnok Tru Svay Rumpear

Chak Trangei

Khon Rang Ampil Tuek

Kampong Preah Kokir

Kampong Tralach

Chhuk Sa

Melum Chres

Phsar Kampong Traiach

Pech Changvar Long veaek

Popel Ou Ruessei

Ponley Peani

Trapeang Chan SaebChol Kiri Chol Sar Ta Ches

kaoh Thkov Thma Edth

Kampong Os

Rolea B’ier

Andoung Snay

Peam Chhkaok Banteay Preal

Prey Kri Cheung Kreav

KampongChhnang

Phsar Chhnang Chrey Bak

Kampong Chhnang Kouk Banteay

Ph’er Krang Leav

Khsam Pongro

Kampong Leaeng

Chranouk Prasneb

Dar Prey Mul

Kampong hau Rolea B’ier

Phlov Tuk Srae Thmei

Pou Svay Chrom

Pralay Meas Tuek Hout


Appendix- 1.2 Continued


SameakkiMean Chey

Chhean laeung

Tuek Phos

AkphivoadthKhnar Chhmar ChiebKrang lvea Chaong MaongPeam Kbal TuekSedthei Khiong popokSvay Krang SkearSvay Chuk Tang KrassangTbaeng Khpos Toul KhposThlok Vien

Appendices 91

Appendix-3.1Geographical Outreach of MFIs

(September 2005)(In million KHR)

Source:NBC, 2006.

No. Name of MFIsNumber

Districts Communes Villages1 AMRET 52 321 1,356

2 HATTHA KAKSEKAR 36 188 1,171

3 TFMF 15 40 47

4 TPC 56` 392 1,723

5 CEB 38 317 1,067

6 SEILANITHIH 33 156 451

7 ANGKOR MFIs 23 164 855

8 VISION FUND 36 182 890

9 CREDIT 47 251 771

10 PRASAC 82 740 4341

11 FUDF 7 - -

12 CBIRD 14 70 278

13 MAXIMA 8 27 89

14 INTEAN PRE 15 31 87

15 CHC 18 55 120

TOTAL 480 2,934 13,246


Appendix-3.2Geographical Outreach of Rural Credit Operators


Source:NBA, 2006.

No. Name of Rural CreditOperators

NumberDistricts Communes Villages

1 CREDO 9 23 99

2 SDR 5 34 88

3 KRDA 2 13 71

4 RDA 1 3 7

5 CWDA - 10 28

6 LWFO 8 24 120

7 CCAPO 1 3 6

8 WSDC 1 8 16

9 AFA 6 31 121

10 ILDO 3 4 11

11 KWWA 2 12 27

12 RED 2 2 5

13 MRD credit scheme 6 21 75

14 ADDKN 1 1 5

15 CCSF 9 44 214

16 BDASE 3 6 18

17 ABI 2 6 20

18 RUFADE 2 5 10

19 CSNA - 4 7

20 NWDA 6 29 61

21 ATDA 1 3 7

22 VCDC 2 8 23

23 CICM 3 6 -

24 TA Ong Soybean DA 1 1 5

TOTAL 76 301 1,044

Appendices 93

Appendix-3.3Loan Outstanding of MFIs


Source:NBC, 2006.

No. Name of MFIsLoan Outstanding

AmountNumber of Borrowers

Male Female Total1 AMRET 42,723.26 28,063 88,867 116,930

2 HATTHA KAKSEKAR 14,056.08 3,605 4,591 8,196

3 TFMF 412.91 147 561 708

4 TPC 18,292.74 - 44,282 44,282

5 CEB 22,463.66 - 10,408 10,408

6 SEILANITHTH 6,469.56 1,313 2,999 4,312

7 ANGKOR MFIs 9,796.74 5,196 30,127 35,323

8 VISON FUND 12,605.06 5,031 20,010 25,041

9 CREDIT 10,190.00 - 12,596 12,596

10 PRASAC 42,367.77 25,415 53,995 79,410

11 FUDF 2,683.00 - 2,589 2,589

12 CBIRD 2,404.72 623 1,261 1,884

13 MAXIMA 1,337.43 205 949 1,154

14 INTEAN PRR 3,922.47 - 2,878 2,878

15 CHC 1,965.00 442 2,953 3,395

TOTAL 191,690.40 70,040 279,066 349,106


Appendix-3.4Loan Outstanding of Rural Credit Operators

(September 2005 (In million KHR)

Source:NBC, 2006.

No.Name of Rural

CreditOperators

Loan Outstanding


Male Female Total1 CRODO 428.09 692 1,710 2,402

2 SDR 535.50 465 923 1,388

3 KRDA 400.44 734 1,245 1,979

4 RDA 125.86 517 672 1,189

5 CWDA 155.00 15 788 803

6 LWFO 79.61 525 641 1,166

7 CCAPO 317.00 50 472 522

8 WSDC 286.00 - 1,280 1,280

9 AFA 2,220.00 170 95 265

10 ILDO 18.00 64 82 146

11 KWWIA 196.28 88 851 939

12 RED 388.90 40 391 431

13 MRD credit scheme 1,020.20 3,310 2,293 5,603

14 ADDKN 80.00 27 7 34

15 CCSF 1,197.04 22 7 29

16 BDASE 80.18 671 974 1,645

17 ABI 96.09 100 415 515

18 RUFADE 104.98 6 93 99

19 CSNA 87.00 - - -

20 NWDA 2,128.80 154 193 347

21 ATDA 80.00 12 18 30

22 VCDC 1,103.00 161 643 804

23 CICM 65.83 28 24 52

24 TA Ong Soybean DA 150.15 200 80 280

TOTAL 11,343.95 8,051 13,897 21,948

Appendices 95

Appendix-3.5Deposit Balances of MFIs


Source:NBC, 2006.

No. Name of MFIsDeposit Balances

AmountNumber of Depositors

Male Female Total1 AMRET 793.91 98 - 98

2 HATTHA KAKSEKAR 651.41 4,314 5,272 9,586

3 TFMF - - - -

4 TPC 2,116.90 - 86,194 86,194

5 CEB 1,002.60 - 10,408 10,408

6 SEILANITHTH 855.92 1,313 2,999 4,312

7 ANGKOR MFIs 35.19 457 1,352 1,809

8 VISON FUND 14.48 16 189 205

9 CREDIT 1,071.00 0 12,596 12,596

10 PRASAC 1,334.19 925 91 1,016

11 FUDF - - - -

12 CBIRD 281.41 376 1,642 2,018

13 MAXIMA 221.17 10 6 16

14 INTEAN PRR - - - -

15 CHC 16.00 - 2,321 2,321

TOTAL 8,394.18 7,509 123,070 130,579


Appendix-3.6Deposit Balances of Rural Credit Operators


Source:NBC, 2006.

No.Name of Rural

CreditOperators

Deposit


Male Female Total1 CRODO 93.89 428 1,230 1,658

2 SDR 47.00 850 560 1,410

3 KRDA 124.54 1,147 1,668 2,815

4 RDA - - - -

5 CWDA 9.00 15 867 882

6 LWFO - - - -

7 CCAPO 204.00 6 82 88

8 WSDC 35.00 - 925 925

9 AFA 66.31 - 239 239

10 ILDO 1.40 64 82 146

11 KWWIA 21.58 81 924 1,005

12 RED - - - -

13 MRD credit scheme - - - -

14 ADDKN 100.00 - 46 46

15 CCSF 116.03 44 - 44

16 BDASE 20.72 778 1,052 1,830

17 ABI - - - -

18 RUFADE 0.87 - 66 66

19 CSNA - - - -

20 NWDA 61.38 152 191 343

21 ATDA 4.00 12 18 30

22 VCDC - - - -

23 CICM 140.00 318 262 580

24 TA Ong Soybean DA 1.57 135 22 157

TOTAL 1,047.29 4,030 8,234 12,264

Appendices 97

Ap

ped

ix-3

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Lo

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Bre

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Mic

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(Sep

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Sourc

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, 2006

Nº

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Agricutu

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Com

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Tra

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House/

Fam

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Care

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To

tal

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MR

ET

31,1

87.9

75,2

97.6

9982.6

32,6

48.8

4854.4

61,7

08.9

442,7

342,7

23.2

6

2A

NG

KO

R M

IKR

OH

ER

AN

HV

AT

HO

8,4

67.8

41,0

01.0

277.7

531.2

918.1

7121.4

579.2

29,7

96.7

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AM

BO

DIA

BU

SIN

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RP

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022,4

63.6

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544.0

09,6

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90.0

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RM

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249.2

4263.1

687.2

9737.7

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PR

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28,9

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67.7

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1


Appendix – 4.1Distribution of Members on the basis of Investment

in Equipments During the Last 12 Months

(Amount in KHR)



Investment in Equipments

<500,000 500,001 to1,000,000

1,000,001 to2,000,000

2,000,001 to3,000,000 >3,000,000 Total


Control Members

50(60)

60(72)

17(20)

9(11)

9(11)

6(7)

3(4)

4(5)

4(5)

4(5)

83(100)

83(100)

Total 110(66)

26(16)

15(9)

7(4)

8(5)

166(100)

KompongChhnangTreatment Members

Control Members

27(53)

34(67)

16(31)

9(18)

7(14)

6(12)

0(0)

1(2)

1(2)

1(2)

51(100)

51(100)

Total 61(60)

25(24)

13(13)

1(1)

2(2)

102(100)


Control Members

77(57)

94(70)

33(25)

18(13)

16(12)

12(9)

3(2)

5(4)

5(4)

5(4)

134(100)

134(100)

Appendices 99


in Improving House During the Last 12 Months

(Amount in KHR)

Note: Figures in the parentheses indicate percentage to total . Source: Personal Survey.


Investment in Improving House

<500,000 500,001 to1,000,000

1,000,001 to2,000,000

2,000,001 to3,000,000 >3,000,000 Total


Control Members

55(66)

46(55)

11(13)

15(18)

9(11)

6(7)

3(4)

6(7)

5(6)10

(12)

83(100)

83(100)

Total 101(61)

26(16)

15(9)

9(5)

15(9)

166(100)


Control Members

38(75)

32(63)

6(12)

5(10)

3(6)

3(6)

1(2)

2(4)

3(6)

9(18)

51(100)

51(100)

Total 7069

11(11)

6(6)

3(3)

12(11)

102(100)


Control Members

93(69)

78(58)

17(13)

20(15)

12(9)

9(7)

4(3)

8(6)

8(6)19

(14)

134(100)

134(100)


Appendix – 4.3Distribution of Members on the basis of Expenses

on Education During the Last 12 Months

(Amount in KHR)



Expenses on Education

<100,000 100,001 to500,000

500,001 to1,000,000

1,000,001 to2,000,000 >2,000,000 Total


Control Members

10(12)

14(17)

38(46)

39(47)

24(29)

17(20)

8(10)

10(12)

3(4)

3(4)

83(100)

83(100)

Total 24(14)

77(46)

41(25)

18(11)

6(4)

166(100)


Control Members

8(16)

14(27)

24(47)

21(41)

13(25)

12(24)

6(12)

3(6)

0(0)

1(2)

51(100)

51(100)

Total 22(21)

45(44)

25(25)

9(9)

1(1)

102(100)


Control Members

18(13)

28(21)

62(46)

60(45)

37(28)

29(22)

14(10)

13(10)

3(2)

4(3)

134(100)

134(100)

Appendices 101


on Food During the Last 12 Months

(Amount in KHR)



Investment in Improving House

<500,000 500,001 to1,000,000

1,000,001 to2,000,000

2,000,001 to3,000,000 >3,000,000 Total


Control Members

3(4)

2(2)

11(13)

15(18)

37(45)

44(53)

19(23)

10(12)

13(16)

12(14)

83(100)

83(100)

Total 5(3)

26(16)

81(49)

29(17)

25(15)

166(100)


Control Members

2(4)

1(2)

9(18)

5(10)

25(49)

31(61)

10(20)

9(18)

5(10)

5(10)

51(100)

51(100)

Total 3(3)

14(13)

56(55)

19(19)

10(10)

102(100)


Control Members

5(4)

3(2)

20(15)

20(15)

62(46)

75(56)

29(22)

19(14)

18(13)

17(13)

134(100)

134(100)



on Health Care During the Last 12 Months

(Amount in KHR)



Expenses on Health Care

<100,000 100,001 to500,000

500,001 to1,000,000

1,000,001 to2,000,000 >2,000,000 Total


Control Members

13(16)

18(22)

58(70)

46(55)

8(10)

12(14)

3(4)

4(5)

1(1)

3(4)

83(100)

83(100)

Total 31(19)

104(63)

20(12)

7(4)

4(2)

166(100)


Control Members

15(29)

3(6)

33(65)

34(67)

3(6)10

(20

0(0)

3(6)

0(0)

1(2)

51(100)

51(100)

Total 18(18)

67(66)

13(12)

3(3)

1(1)

102(100)


Control Members

28(21)

21(16)

91(68)

80(60)

11(8)22

(16)

3(2)

7(5)

1(1)

4(3)

134(100)

134(100)

Appendices 103

Appendix – 4.6Distribution of Members on the basis of Savings

During the Last 12 Months

(Amount in KHR)



Amount of Savings

<500,000 500,001 to1,000,000

1,000,001 to2,000,000

2,000,001 to3,000,000 >3,000,000 Total


Control Members

31(37)

35(42)

30(36)

27(33)

12(14)

13(16)

6(7)

1(1)

4(5)

7(8)

83(100)

83(100)

Total 66(40)

57(34)

25(15)

7(4)

11(7)

166(100)


Control Members

14(27)

17(33)

17(33)

15(29)

8(16)

14(27)

5(10)

1(2)

7(14)

4(8)

51(100)

51(100)

Total 31(30)

32(31)

22(22)

6(6)

11(11)

102(100)


Control Members

45(34)

52(39

47(35)

42(31)

20(15)

27(20)

11(8)

2(1)

11(8)11(8)

134(100)

134(100)



on Ceremonies During the Last 12 Months

(Amount in KHR)



Expenses on Ceremonies

<100,000 100,001 to500,000

500,001 to1,000,000

1,000,001 to1,500,000 >1,500,000 Total


Control Members

3(4)

2(2)

44(53)

49(59)

29(35)

29(35)

5(6)

1(1)

2(2)

2(2)

83(100)

83(100)

Total 5(3)

93(56)

58(35)

6(4)

4(2)

166(100)


Control Members

2(4)

1(2)

43(84)

34(67)

5(10)

11(22)

0(0)

3(6)

1(2)

2(4)

51(100)

51(100)

Total 3(3)

77(75)

16(16)

3(3)

3(13)

102(100)


Control Members

5(4)

3(2)

87(65)

83(62)

34(25)

40(30)

5(4)

4(3)

3(2)

4(3)

134(100)

134(100)

Appendices 105

Appendix – 4.8Distribution of Members on the basis of Average Cash Flow

Per Day During the Last 12 Months(Amount in KHR)



Amount of Average Cash Flow

<10,000 10,001 to50,000

50,001 to100,000

100,001 to200,000 >200,000 Total


Control Members

10(12)

17(20)

37(45)

42(51)

19(23)

9(11)

10(12)

7(8)

7(8)

8(10)

83(100)

83(100)

Total 27(16)

79(48)

28(17)

17(10)

15(9)

166(100)


Control Members

20(39)

27(53)

21(41)

15(29)

6(12)

8(16)

2(4)

1(2)

2(4)

0(0)

51(100)

51(100)

Total 47(46)

36(35)

14(14)

3(3)

2(2)

102(100)


Control Members

30(22)

44(33)

58(43)

57(43)

25(19)

17(13)

12(9)

8(6)

9(7)

8(6)

134(100)

134(100)


Appendix – 4.9Distribution of Members on the basis of Income

in Business During the Last 12 Months

(Amount in KHR)

Note: Figures in the parentheses indicate percentage to total. Source: Personal Survey.


Amount of Busiiness Income

<2,000,000

2,000,001to4,000,000

4,000,001to6,000,000

6,000,001to8,000,000 >8,000,000 Total


Control Members

7(8)14

(17)

11(13)

21(25)

17(20)

10(12)

13(16)

4(5)

35(42)

34(41)

83(100)

83(100)

Total 21(13)

32(19)

27(16)

17(10)

69(42)

166(100)


Control Members

8(16)

8(16)

15(29)

19(37)

8(16)

9(18)

3(6)

3(6)

17(33)

12(24)

51(100)

51(100)

Total 16(16)

34(33)

17(17)

6(6)

29(28)

102(100)


Control Members

15(11)

22(16)

26(19)

40(30)

25(19)

19(14)

16(12)

7(5)

52(39)

46(34)

134(100)

134(100)

Appendices 107


in Business During the Last 12 Months

(Amount in KHR)



Investment in Business

<500,000 500,001to1,000,000

1,000,001to2,000,000

2,000,001 to3,000,000 >3,000,000 Total


Control Members

14(17)

45(54)

26(31)

15(18)

25(30)

12(14)

8(10)

4(5)

10(12)

7(8)

83(100)

83(100)

Total 59(36)

41(25)

37(22)

12(7)

17(10)

166(100)


Control Members

11(22)

13(25)

11(22)

27(53)

20(39)

6(12)

7(14)

3(6)

2(4)

2(4)

51(100)

51(100)

Total 24(24)

38(37)

26(25)

10(10)

4(4)

102(100)


Control Members

25(19)

58(43)

37(28)

42(31)

45(34)

18(13)

15(11)

7(5)

12(9)

9(7)

134(100)

134(100)


Appendix – 4.11Distribution of Members on the basis of Investment in Equipments for House During the Last 12 Months

(Amount in KHR)



Amount of Investment in House Epuipments

<100,000 100,001 to500,000

500,001 to1,000,000

1,000,001 to2,000,000 >2,000,000 Total


Control Members

23(28)

41(49)

39(47)

30(36)

6(7)

6(7)

7(8)

3(4)

8(10)

3(4)

83(100)

83(100)

Total 64(38)

69(42)

12(7)

10(6)

11(7)

166(100)


Control Members

15(29)

15(29)

25(49)

29(57)

8(16)

5(10)

2(4)

0(0)

1(2)

2(4)

51(100)

51(100)

Total 30(29)

54(53)

13(13)

2(2)

3(3)

102(100)


Control Members

37(28)

56(42)

64(48)

59(44)

14(10)

11(8)

9(7)

3(2)

9(7)

5(4)

134(100)

134(100)

Appendices 109

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