Refinancing applications drop sharply

THE number of loan restructuring applications has seen a steep drop over the last three months in an encouraging sign of Covid-19’s loosening grip on the Kingdom, the Cambodia Microfinance Association (CMA) said.

The National Bank of Cambodia (NBC) late in March issued a directive to all banks and financial institutions – including microfinance institutions (MFIs) – to restructure credit for loans in four priority sectors.

The move was a bid to maintain financial stability, support economic activity and ease the burden of debtors facing declining revenues during Covid-19.

The four priority sectors cited by the NBC were garments, construction, logistics and transport (with emphasis on taxi and tuk-tuk drivers).

Between March 1 and August 9, 266,818 clients affected by Covid-19 had applied for credit restructuring from MFIs, CMA head of communications Kaing Tongngy said. Of the number, 250,905 or 90 per cent were approved for $1.23 billion.

But he noted that the number of applications steadily declined to a weekly average of 20,000 in April-May and 10,000 in MayJune. Tongngy predicted a further contraction to 2,000-3,000 by the end of this week.

“We can conclude that the impact of Covid-19 has significantly ebbed, and some customers have even asked to pay principal and interest as they had done in the past,” he said.

Vithey Microfinance Plc CEO Bun Mony told The Post on Thursday that his MFI has also seen a downtick in the number of loan restructuring applications in recent months.

Since last month, he said, his institution had disbursed an average of between $100,000 and $150,000 per month, having been unable to do so just months before at the apex of the Covid-19 crisis.

“We now have a lot of new customers coming in and borrowing money from our institution to expand operations and start new businesses, so we can disburse capital steadily from now on,” Tongngy said.

The PAR30+ ratio of the microfinance sector increased from one to two per cent during Covid-19, which he said was not at alarming levels.

By the second quarter of 2020, 2,186,143 clients had outstanding loans from MFIs, leasing companies and rural credit operators to the tune of $7.262 billion, while a total of 2,870,223 depositors had deposited $3.618 billion, according to data from the CMA.