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Primed for a crowded market

Kim Seoung-su, CEO and director of Prime MF Microfinance, attends the company’s opening in Phnom Penh on Friday. Photo by: Sovan Philong
Cambodia’s 25th microfinance institution has opened its doors, becoming
the latest entrant to what many say is an increasingly crowded sector.
But financiers have welcomed the launch of South Korea’s Prime MF
Microfinance, saying it provides another opportunity to extend credit
to the Kingdom’s smaller borrowers.

Prime’s Chief Executive
Officer and director Kim Seoung-su said US$500,000 has been invested to
start up the venture, adding that the company looked to offer $3.5
million in loans in its first year at low interest rates.

“We
have many competitors, but I don’t think the industry is very
competitive – though we still have some challenges,” he said at the
company launch in Phnom Penh’s Tomnob Tek commune, Chamkarmon district,
on Friday.

“I have two main plans – first to target middle
[class] and poor people, and second we will enlarge our credit
service,” he said.

The MFI intends to offer loans to groups of
people, some without collateral, providing that fellow group members
act as guarantors.

Although there is a high number of MFIs in the Kingdom, there are fewer than in neighbouring Vietnam and Thailand, he claimed.

Kim Seoung-su added hopes that Prime would be able to grow in line with the Kingdom’s economy.

“I hope we have more opportunities to grow within the next few years in Cambodia, especially if your economy keeps improving.”

Officials
have welcomed the move. “I believe Prime will try its best to offer
more products and services to more and more people, especially rural
people,” said Kim Vada, deputy director general of the National Bank of
Cambodia.

While Chea Phalarin, chairman of the Cambodia Microfinance Association, also welcomed the latest market entrant.

“We welcome more and more investors into the market, as loan demand is very high,” he said.

According
to Sim Senacheert, general manager of the Kingdom’s largest
micro-lender Prasac, although there may be too many MFIs in Cambodia,
many are smaller operators that are not particularly competitive.

“Only
about nine MFIs have a portfolio greater than $10 million,” he said.
“Indeed, many MFIs are not a concern for us as they are small, and
largely operate in the city.”

Prime is the second Korean-owned MFI to set up in the Kingdom, following Angkor ACE Star Credits Limited’s launch last year.

Prime
plans to open more branches in Phnom Penh berfore spreading to the
provinces, including branches in Kampong Thom, Battambang,
Sihanoukville, and Kampong Speu.

Micro-lending from the
Kingdom’s MFIs and ACLEDA Bank’s small loans increased more than 33
percent in 2010 to $647 million, from  a total of $485 million in 2009.

The
Non-Performing Loan rate declined from 2.86 percent in 2009 to 1.29
percent last year, figures from the Cambodia Microfinance Association
show.

Phnom Penh Post
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