The microfinance industry could be headed for trouble, according to industry insiders, as the ratio of delinquent loans appears to have double since January.
Speaking at an industry workshop yesterday, insiders expressed concern over a noticeable increase in the amount of delinquent debts reported by microfinance institutions (MFIs) across Cambodia. The spike is attributed to farmers struggling to repay their loans after a drought affected their crops earlier this year.
According to Hout Ieng Tong, Chairman of the Cambodia Microfinance Association (CMA), total loan portfolio at risk (PAR)—the share of loans where payments are more than 30 days overdue—has surpassed 1 percent, from 0.5 percent at the start of the year.
“Loans in the agricultural sector account for about 30 percent of all lending in the microfinance industry, and this sector was seriously affected by drought in April and May,” he said.
The spike in delinquent loans has been accompanied by a rise in cases of clients taking loans from multiple institutions, a worrying practice that increases the risk of default.
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