Cambodia’s microfinance institutions are competing with each other with various strategies to extend growth, following a decline in their number of borrowers in the wake of the economic downturn.

The Prasac Microfinance Institution has implemented three strategies over the past two months in order to bring in more borrowers, said Sim Senacheert, general manager of the lender. These include the reduction of interest rates, of up to 0.6 percent, a loosening of credit requirements and promotions through the mass media.

“We put down strategies to boost lending growth, and after these strategies were implemented, our credit demand grew between 4 percent and 5 percent,” he told VOA Khmer in an interview.

Interest rates for microfinance lending are some of the highest in the region, between 2 percent and 4 percent per month, and also require collateral and a guarantor.

But microfinance lenders have reported a drop in demand, as less people seek to expand their businesses in a slowing economy. As a result, these rates are coming down.

The Sathapana Microfinance Institution announced a rate reduction of 0.2 percent, starting in August, and the president of the lender, Bun Mony, said he had organized a special research team to learn more about customer demand.

“They will interview people directly to see what they don’t have,” he said. “If we are able to fulfill their needs, we will positively respond to that.”

Huot Eang Tong, president of the Hattha Kaksekor Microfinance Institution, said his company will reduce the waiting period for borrowers from three or four days to just one or two.

The new policies are a turnaround for the lenders, who in late 2008, in the midst of the global economic downturn, tightened their lending policies or increased their rates to protect capital.

The reported decline in borrowers is a first in the ten years since micro-lending became popular in Cambodia, which now has 20 microfinance companies that play a key role in economic development in rural areas.

Facing the new situation, lenders like the Credit Microfinance Institution are considering raising the amount of money they will lend beyond $10,000.

“I think this can keep us alive and competitive,” Credit President Chan March said.

Credit plans to open three to five sub-offices in the provinces in a bid to extend its lending.

Huot Eang Tong, who is also chairman of the country’s Microfinance Institutions Association, said the new strategies might help in the short term, but “only better economic conditions will make people start businesses and need capital.”

Hang Chuon Naron, secretary-general of the Ministry of Economy and Finance, said the ministry supported the initiatives, especially the reduction in interest rates, saying this could provide better for Cambodian farmers.

However, the ministry wants to see interest rates decrease from 30 percent per year to 16 percent annually, he said.