Chor Sooho, Chief Executive of new micro-finance institution, was quoted by the Post as saying that the firm- which has made an initial investment of US$1 million – would offer competitive rates in the crowded MFI market.

“The scope of our firm’s loan’s would be between US$300 and US$5,000 to a client with a competitive interest rate between 1.8 percent to 4 percent per month,” he said, and added that the decision to open the MFI came after seeing many customers access loans in Cambodia with relatively high interest rates.

The latest reforms are part of the ongoing ADB second sector program support – which began in 2007 – to assist Cambodia to further develop its financial system.

In statement, Samiuela Tukuafu, Senior Financial Sector Specialist in ADB’s Southeast Asia Department said that “Cambodia has taken many positive steps to develop its financial sector since the instability of the 1970’s and 1980’s, but still faces policy gaps, capacity constraints and other challenges,”

“The ongoing program builds on earlier actions to improve the legal and regulatory environment, to boost sector capacity, to improve disclosure standards and financial transparency, and to build up infrastructure,” he added.

According to the statement, ADB’s loan from its concessional Asian Development Fund has a 24-year term, including a grace period of eight years, with an interest rate of 1% per year during the grace period and 1.5% for the rest of the term. The National Bank of Cambodia is the executing agency for the current program phase which runs from January 2009 to December 2009.

With the achievement of all reform milestones in the third subprogram, a fourth round of measures will be implemented starting in January next year, with the full sector program due for completion in December 2010, read statement.

According to the bank’s statement, this grant will initially fund training in mechanics, construction, business services and information and communication technology in the government’s technical and Vocational Education Training Program before moving onto other industries.

The global financial crisis has underscored the vulnerability of Cambodia’s industrial sectors. Agriculture, manufacturing and the services industry account for 85 percent of country’s employment and 92 percent of its gross domestic product (GDP).

Wendy Duncan, the principal education specialist in ADB’s Southeast Asia Department, said in statement that “the government recognizes that the issue of productivity must be addressed, as must the need to attract new industries to increase the diversification of the economy.”

According to ADB, Cambodia’s government will contribute US$3 million toward the project’s total cost of $27.52 million.

According to CMA’s data, non-performing loans (NPLs) declined 1.9 percent over the period to 1.48 percent, or US$8.7 million.

“We have seen the economic situation begin to recover, and people have begun to expand their businesses, so they need capital again,” Hout Ieng Tong, CMA President, was quoted by the Post as saying.

“The slash of interest rates of between 0.2 and 0.5 percentage points by MFIs in early September was also a factor,” said he. He added that interest rates are currently between 1.5 and 2.8 percent per month at MFIs.

During this period, the total loans increased but the number of borrowers was down 14.7 percent to 883,087 down from more than 1 million three months earlier, according to the report.

The report show that CLEDA bank’s outstanding portfolio of small loans was up 5.49 percent to US$172.2 million, while the drop of its NPL ration was from 1.63 percent in 2nd quarter to zero at the end of the September of 2009.

Chea Chanto, governor of the National Bank of Cambodia, was quoted by the Phnom Penh Post as saying that “Currently, banks in Cambodia dare not grant long-term (five- or 10-year) loans to businesses because they are worried about losing their money, and this is an impediment for entrepreneurs to expand businesses and-small-and-medium enterprises (SMEs),” adding that “the draft law on financial leases will enable businesses and SMEs in Cambodia to obtain a long-term source of capital from the banking and financial system with limited collateral.”

Stephen Higgins, CEO of ANZ Royal Bank, said that the banking structure in Cambodia leaves too much risk for banks to handle a large lease portfolio, reported the Cambodia Daily.

Chea Chanto explained that financial leases refer to the leases of assets and properties over the long term, between a lessor (a licensed bank or lease company) and a lessee (a developer, manufacturer or other customer). He added that financial leases could include properties such as machinery and all kinds of equipment, but excluded land and buildings, reported the Phnom Penh Post.

Jim Swander, an independent financial consultant, said that the new leasing law will not help as many small and medium enterprises as some might think, reported the daily.

“In some ways it’s a good move, but it isn’t going to help the people it was designed to help,” said he. He added that leases can be more risky for banks because leased items can be moved or stolen, unlike real estate, which is often used as collateral in loans.

Yim Sovann, Sam Rainsy Party parliamentarian, said he supported the law. “I appreciate the government for creating this law, as the country is suffering from the global financial crunch,” he said. “It will help develop Cambodia’s SMEs, which contribute about 65 percent to GDP and employ 85 percent of the entire workforce,” reported the phnom penh post.

The money has been made available through the bank’s Asian Development Fund (ADF), which received a $400 million boost Tuesday as part of a much broader $3.4 billion fiscal spending package approved by the bank’s directors, the Phnom Penh reported.

According to the Phnom Penh Post, The ADF resources are intended to finance key development investments in those low-income countries that are among the most fiscally constrained in responding to the crisis.

ADB Country Director for Cambodia Arjun Goswami was quoted but the Phnom Pen Post as saying that the Cambodian government was currently determining which sectors most needed the additional economic stimulus to offset the impact of the economic crunch. “We haven’t gone through the list yet to nail down exactly which ones.”

Khieu Kanharith, Minister of Information and Government’s spokesman, said that he welcomes this decision and regards it as a way to encourage more commercial businessmen from United States of America to invest in Cambodia since America is a major partner of Cambodia, reported Khmer-language newspaper, Rasmei Kampuchea.

Chheang Von, lawmakers and chairperson of the Commission of Foreign Affairs of the National Assembly, said that America’s decision is a big encouragement for Cambodia and facilitation for trade and investment related to international cooperation between Cambodia and other countries, especially United States of America, which is the powerful country of the world, continued newspapers.

Khieu Kanharith added that though the funding aid from America to Cambodia is a small amount, but it has assisted Cambodia a lot in different international institutions. In addition, Obama’s decision is another step in order to push for more American businessmen in Cambodia, reported paper.

Lending loan to American investors to do business in Cambodia is because that Cambodia is no longer “a Marxist-Leninist country” under the terms spelled out in the Export-Import Bank Act of 1945, which established the government agency charged with promoting the export of American goods and services.. So far, there are six countries that the United States of America still does not offer commercial loans for investment, including Burma, Cuba, Iran, North Korea, Sudan and Syra.

The US Export-Import Bank authorized US$243.74 million to ASEAN last year in loans, guarantees and insurance, most of which – $234.73 million – went to Singapore.

“I think that President Barack Obama removed our country from his trade blacklist because he recognised our development, and this will pave the way for businesspersons to get loans from American banks to do business here,” Cheam Yeap said, quoted by the Phnom Penh Post as saying.