National bank grants AMK deposit licence

Photo by: Svoan Philong
An employee of AMK at the entrance to a Phnom Penh branch of the microfinance institution last month.

via CAAI News Media

Wednesday, 10 February 2010 15:01 Nguon Sovan

MFI says it plans to begin accepting deposits later this month

MICRO-FINANCE institution (MFI) AMK was granted a licence to take deposits by the National Bank of Cambodia (NBC) on Friday, a year and a half after it first applied.

It is now the third MFI to be granted a deposit-taking permit. The first two were Amret and Sathapana, which were both granted licences last year.

Paul Luchtenburg, chief executive officer of AMK, said Tuesday that it will begin to put the deposit service into effect in Phnom Penh and the other five main provinces in mid-February.

In May, AMK will formally launch the service across its entire network and will set up a money-transfer system. He said that the licence comes at an ideal time, since many banks have excess liquidity and have lowered, or are set to lower, interest rates.

Interest rates at AMK will be much higher than commercial banks, he added, because of the current high costs of gaining funds from international lenders.

“We will offer very attractive rates for term deposits: 11 percent for riel currency and 8 percent for dollars. Current account rates will be lower but competitive,” he said. “This creates a win-win situation where we can afford to give high rates to our clients and at the same time reduce our cost of borrowing.”

He said that the primary reason AMK applied for the licence is that people, especially the poor, need to have safe access to savings services.

“This allows them to have funds available for emergencies and to accumulate funds to expand their businesses. Accepting local deposits also gives us an affordable source of local currency, which in turn allows us to offer small loans in rural areas.”

The positive outlook comes despite AMK’s recording a 53 percent drop in profits last year, to US$423,897 from $903,929 in 2008. Luchtenburg put this down to increases in tax provision due to changes in the law. He added that loan disbursements were down slightly to $30.5 million in 2009 from $31.5 million in 2008, while non-performing loans rose to 2.8 percent from 0.36 percent.

Chea Phalarin, general manager of Amret, said Tuesday that customers’ confidence to deposit in MFIs has increased gradually because of higher interest rates.

“Deposits at our MFI rose to $3 million last year, from just $700,000 in 2008,” he said, adding that he expects deposits will double this year thanks to increased promotion.

He said that his MFI offers interest rates of 10 percent and 8.5 percent for riel currency and US dollars respectively on one-year deposits.

To gain a licence, an MFI must prove it has carried out operations for more than three years, is in good financial condition and has capital of at least 10 billion riels (US$2.4 millon), among other requirements