Micro-lending institutions have been forced to cut their rates to attract customers amid tight competition across the sector
Microfinance lenders have cut interest rates by between 0.2 and 0.5 percent in a bid to attract customers amid an intensely competitive market, the chairman of the Cambodian Microfinance Association (CMA) said Friday.
The cut follows heavy criticism of the Microfinance Institutions (MFIs) in recent months over high rates, which sector representatives claimed were necessary to cover costs.
But Hout Ieng Thong said the rate cut would neither threaten profitability nor expose the sector to bankruptcies, as lenders had streamlined operations in recent months.
"Earlier this year we felt that we could not reduce rates because we had some difficulties in terms of operational costs, but we have improved our operations," he said. "We have also taken some measures to improve risk management."
Hout Ieng Thong said Hattha Kaksekar Limited, of which he is chief executive officer, has reduced rates from around 3 percent per month to 2.5 percent. The lender had disbursed $28 million to 44,000 customers, he said.
Prasac Microfinance Institution reduced rates from 3 percent to 2.7 percent per month, while rates on smaller loans were dropped from 2.2 percent to 1.6 percent, after borrower numbers dropped from 100,000 customer last year to 80,000 as of August, General Manager Sim Senacheert said.
"The effect of the economic downturn on people's incomes and tough competition among MFIs are the main factors for the reduction in interest rates," he said.
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