Expanding access to credit and financial products

Expanding access to credit and financial products

Domain of intervention : Microfinance
 Implementation : AMRET
Country : Cambodia

 

Context

Traditional bank financing of the economy is widely insufficient in Cambodia and cannot meet the needs of very small businesses which largely make up and embody the country’s economic development. Clients unserved by banks turn to microfinance institutions (MFIs) and are nowadays gaining much wider access to lower cost credit thanks to the current institutionalization of these institutions. The only other alternative for these clients is the informal sector where annual rates sometimes reach the 100% interest rate.

At the end of 2006 Cambodia had 16 licensed MFIs, this figure is stable compared with 2005. Cambodian MFIs have considerable growth prospects as can be seen by the extremely low use of banking facilities (around 15%) which is a sign of the extent of unmet credit needs. AMRET is one of the biggest players in terms of client numbers and its network size in rural and semi-rural areas.

Targets

By becoming a shareholder of the MFI Proparco will be actively supporting the institution in its future changes (institutional change) and will be helping it deal with current issues in the sector. Thanks to this equity financing AMRET will be able to pursue its growth and reach an increasing number of clients.
The allocation of a line of credit during the current financial and banking crisis will stabilize the institution’s resources and will consequently ensure that 2009 portfolio growth targets are reached.

Project Description

In March 2008 PROPARCO participated in AMRET’s capital increase up to EUR1.6M in the framework of this project and has just allocated a USD4M loan to finance the institution’s growth.

Impacts

By financing the development of AMRET’s activity PROPARCO is contributing to actions to underpin economic growth in Cambodia via support for the creation and development of microactivities. This financing will help AMRET enter into a new growth phase that will open up access to credit to a much wider population. By diversifying financial products via the development of savings products and transfers it will in particular meet considerable population needs. Thanks to this financing AMRET will also contribute to maintaining or creating numerous jobs (almost 200 000), particularly for women.

Dates and amount

Start-up : 2008
Financing: EUR1.6M equity investment and 4 million US dollar loan.