Microcredit Repayments
While rising inflation poses some financial challenges for rural farmers, it generally isn’t preventing them from paying off loans from microfinance institutions (MFIs). Farmers tend to be able to pay their loans off even though higher prices of food, fuel, fertilizer, pesticides, labor, and some basic agricultural commodities have led to higher production costs. As many Cambodian farmers typically don’t have enough capital to start or expand their agricultural production, many resort to micro-loans, mostly at high interest rates, to maintain production. While farmers need to borrow more money to meet rising production costs, the additional loans for consumption often put households in debt, which is a worrying sign if they cannot afford to make the loan repayments… According to several comments from microfinance industry insiders, the current increase of gasoline and food prices shouldn’t be a big concern about the capacity of loan repayments of rural residents. The capacity of loan repayments of microfinance client is getting better and better compared to the last two years. According to a report from the Cambodian Microfinance Association (CMA), PAR (Portfolio At Risk) amounted to an average of 1 percent in 30 days in the first quarter of 2011, while in the same period last year, it was about 3 percent.
