National Bank of Cambodia orders MFIs to step up lending in riel

On December 1, The National Bank of Cambodia “NBC” issued a Prakas requiring all Micro-Finance Institutes (MFIs) to adopt measures to promote the usage of the national currency – Riel.  The implementation of this Prakas shall extend for three years.  Cambodian microfinance institutions are willing to comply with the new regulation which requires them to hold at least 10 percent of their loan portfolio in the currency of the Kingdom of Cambodia.

Lay Kimchhen, CEO of Niron Microfinance Plc., said that the Company has been given notice of the Prakas and they are willing to comply because it promotes the use of the national currency.  Furthermore, this new requirement will not be difficult to implement because their institution has already held and issued loans using the Riel currency.  He also mentioned that this policy could be difficult to implement for other MFIs which have foreign shareholders because they will face the additional problem of fluctuating currency exchange rates.

Mothers of Financial Japan Plc, is another MFI which will be affected by the Prakas.  Their Chief Operating Officer said that for his institution, the US dollars is now fully recognized as the standard currency for holding loan portfolios.  As a standard practice they rely on the requests of the client and the great majority of clients request for them to hold their loans in the US Dollar currency.  However, since NBC has given their institution adequate time to implement the policy, they will establish a new team for servicing customers who want to use the Riel currency.  He further admitted that there will be challenges with the exchange of currency transactions when servicing a loan due to fluctuating exchange rates, but their institution will find a way to minimize the inherent risks of currency exchange transactions.

Last modified on Thursday, 08 December 2016 07:38
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