Global microscope on the microfinance business environment 2012

26
to state their interest rates on a declining rate
method as of July 2011. Competition is intense and
clients know the interest rate structure and the
organisation with the most competitive rates.
■ Cambodia
Key characteristics of the microfi nance business
environment:
l Although the immediate aftermath of the global
fi nancial crisis led to a sharp rise in delinquencies,
the average portfolio at risk (PAR) in Cambodia as
of May 2012 was just 0.22%, which suggests that
fears that multiple indebtedness would lead to a
crisis have not materialised.
l There are as yet no regulations for mobile
banking or microinsurance in Cambodia.
l Consolidation among the 30 members of the
Cambodia Microfi nance Association has been
discussed for a while as the market seems crowded,
but MFI leaders interviewed say they prefer to grow
organically rather than acquire other institutions.
Key changes and impacts since last year:
l Two new MFIs were granted licences in 2011,
down from six in 2010. The National Bank of
Cambodia (the central bank) remains open to
licensing new institutions but the crowded nature
of the market is leading to a slowdown in
greenfi eld investments.
l Members of the Cambodia Microfi nance
Association signed an agreement regarding the
Credit Bureau Cambodia, but some concerns about
usage fees remain, leaving doubts about how
effective the credit bureau will be.
l Increasing competition, improving effi ciency
and enforced pricing transparency continue to put
downward pressure on retail interest rates.
According to a report, MF Transparency, released in
November 2011, from 2005 to 2009 the average
monthly interest rate on microloans declined from
3.38% to 2.99% for KHR loans and from 2.71% to
2.26% for US dollar loans.
© The Economist Intelligence Unit Limited 2012
<strong>Global</strong> <strong>microscope</strong> on the microfi nance business environment 2012
■ China
Key characteristics of the microfi nance business
environment:
l Although the provision of rural credit is rising as
a priority for the government, microfi nance is in its
infancy in China, and includes a variety of
institutions: 4,300 microcredit companies (MCCs),
credit-only, which do few small loans; 635 village
and township banks (VTBs), which operate as small
banks; rural credit co-operatives (RCCs), rural
commercial banks (RCBs) and rural co-operative
banks (RBs), 2,667 in total, which offer (generally
limited) rural fi nancial services; downscaled
commercial banks with broad outreach; and
unregulated institutions such as NGOs and Village
Co-operative Funds (VCFs).
l The regulatory capacities of the People’s Bank of
China (PBC, the central bank) and the China
Banking Regulatory Commission (CBRC) are
relatively strong, so the institutions that fall under
their authority are well regulated. Resources for
regulating MFIs are limited, compared with those
for the main banking sector. MCCs are supervised
by provincial government fi nancial offi ces, whose
capacity are much weaker and vary among regions.
NGOs and VCFs, which comprise a small part of the
total microfi nance sector, are subject to little
oversight, but cannot accept deposits and
represent no systemic risk.
l Regulations for MCCs provide signifi cant
geographical and ownership limitations, which
inhibit these institutions from achieving signifi cant
economies of scope or scale. Consequently,
competition is limited. Commercial banks are
encouraged to downscale into fi nance for small and
medium-sized enterprises (SMEs), but there is
limited uptake. The government places greater
emphasis on expanding rural credit coverage
through setting up more CBRC-regulated MFIs in
unbanked areas.
l Standards of transparency with regard to fees
and interest rates vary substantially between MFIs
in China, and there is little industry-wide guidance
on this issue. There are no requirements for
standardised disclosure in product advertisements