Farmers urged: Do your sums

Sok Chan

Lack of financial literacy damaging agriculture

A local financial tech-savvy firm says there is an urgent need to develop financial literacy among farmers, agricultural cooperatives, rice millers and exporters and to get them acquainted with the concept of microfinance to help build capacity.

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Sim Chankiriroth, chief executive officer (CEO) and founder of Banhji, the financial technology company concentrating on supporting small and medium-sized enterprises and  the agriculture and cooperative sectors, says that cash flow management, and even using cash itself are still challenges in rural areas.

He adds agriculture enterprises and cooperatives generally do not have any financial skills which means they do not keep financial records and therefore cannot comply with certain laws or financial institution regulations. Furthermore, they do not have the ability to hire  auditors and
lack collateral.

Agricultural stakeholders gathered at the first Sustainable Rice Summit. KT/Sok Chan

Agriculture cooperatives and rice millers mostly use cash but, without formal records, their history with financial institutions is limited, leaving them open to an inability to show their credit worthiness.

“These are the main factors which act as a barrier for them to borrow from financial institutions: It is difficult for MFIs [microfinance institutions] to decide whether they can make a loan to an agriculture cooperative or not, what the amount of the loan should be and how much interest to charge,” says Sim.

There is high demand for financing in the agriculture sector from producers to exporters, says Hout Sokha, chief commercial business officer of AMK Microfinance. He says producers need funds to purchase items such as seedlings, fertilisers and equipment. Equally, buyers also need working capital to pay for farmers’products.

“There are challenges faced by producers and buyers. Most risk lies in the sustainability of income, technical skills and the ups and downs of the markets. These are the challenges financial institutions face before making a decision whether to lend money to agriculture cooperatives,” Hout adds.

Song Saran, president of the Cambodia Rice Federation

“Our loan portfolio is $350 million so far. Of which, 50 percent goes to the agriculture sector. Our strategy is to boost the rice sector in Cambodia,” he says. “In 2020, we want to push the agriculture sector. We want to contribute the financial solution to the rice sector.”

“When we provide  loans to cooperatives and farmers, financial data is important. They [cooperatives and individual farmers] do not know how to manage the data or keep proper documentation. They can tell us they made a profit in their business but they do not have the data and information to verify it. However, financial institutions need proof,” Hout maintains.

“If the issues are resolved, successful sustainability will work because the role of MFIs is to provide loans and get the money back without causing over-indebtedness. We want to provide the loans so they use the money efficiently and to their benefit.”

Hout wants to have one trust system that links all relevant stakeholders – agriculture cooperatives, buyers, rice millers and agriculture input suppliers – to sign-up to a system that will resolve all financial issues.  He says that all sectors play a crucial role.

Sim Chankiriroth, chief executive officer and founder of Banhji.
KT/Khem Sovannara

When it comes to the system, Banhji will play a linking role to support agriculture cooperatives and small and medium enterprises (SMEs) in agriculture to create professional auditing systems and help participants to get financing from a financial institution through a digital platform.

“We have more than 4,000 enterprises in Cambodia and we have partnered with 13 financial institutions. Transactions on this platform amount to around $3.5million per month,” Sim adds.

He  points out that: “If we look at the financial institutions that work with agricultural cooperatives, their cost is high because they need to hire staff to go out on the road. Mostly, because of the paperwork involved and the availability of mobile phones, appropriate staff mostly want to work with city-based

In addition to this, working with the agriculture cooperatives is less profitable, but the operation cost is high. Therefore, there are fewer banks and MFIs interested
in working in the agriculture sector.

“Our solution at Banhji is that we create the financial digital system that can help the agricultural cooperatives to manage their income. Our system will record and manage the financial flow, loans and savings, sales and purchase contracts,” Sim adds.“What is most important is to get agricultural cooperatives to build up a history
of working with banks and MFIs so that we automatically
can link and record all transactions,” he adds.

“Mostly, agriculture cooperatives and businesses record only their income, but expenses require the services of an accountant, so that becomes Banhji’s job. Therefore, when there is data from the bank on payments and other transactions, we have a financial statement, so we can get a loan from a bank.

“We provide the [umbrella] service on debt, income, loans, shares and management scale. We are discussing a system to monitor financial information automatically and on time to enable a bank to decide whether to provide a loan. We help the bank to make the decision.

“The agriculture sector is important and we are investing heavily in it in 2020. Banhji invested a lot to develop the technology and provide solutions to help society and make a profit.”

At the inaugural Sustainable Rice Summit 2020 in Siem Reap province, Cambodia Rice Federation President Song Saran highlighted the importance of the industry working together to make this happen.

“All relevant stakeholders should help to identify the financial and technological resources that are available. By linking everything together in one bloc, we can help each other,” he says.

“All agriculture cooperatives should seek partnerships with financial and technological institutions and be open to innovative ideas. While farmers are worried about climate or external issues, it’s important for them to find exporting companies and sign contracts with them. Farmers have to become more entrepreneurial and that includes crop diversification,”  Song adds.

Mey Kalyan, senior adviser to the Cambodian government Supreme National Economic Council, said that the recent slow growth of the agriculture sector in Cambodia needs to be addressed urgently. “If the slowdown of the agriculture sector continues, it threatens the stability of the country,” he says.

Mey Kalyan, Senior Adviser to the Supreme National Economic Council. KT/ Siv Channa

Mey adds that a big increase in migration from rural to urban areas and emigration to other countries is being caused by the current stagnation of the agriculture sector. “Agriculture is the engine of Cambodia’s economy and it needs to grow faster,” he argues.

He notes New Zealand has done this successfully. He also suggests there should be collaboration with the tourism sector to help increase visitors to the Kingdom.

The government’s work in recent years, improving roads, the electricity supply and the country’s infrastructure means that conditions are favourable for Mey’s vision. However, he stresses the importance of getting the system right, saying, “We need three key things – first is more income and a decent income for farmers, second is the stability of the production process and the third is reducing risk.”

Mey say it is also essential for farmers to move towards crop diversification. “Not only should farmers be self-reliant, they should really think about the way they are doing business,” he insists. “If their current crops aren’t making them the profits they need to survive, they need to switch to other lower-risk crops to create stability.”


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