ADB, Cambodia Sign $70 Million Loan for Rice Commercialization, Finance Reforms

Loan agreements worth $70 million will expand Cambodia’s rice sector and promote reforms in the finance sector.

PHNOM PENH, CAMBODIA – The Government of Cambodia and the Asian Development Bank (ADB) today signed loan agreements worth $70 million to expand the country’s rice sector and promote reforms in the finance sector.

Signed by Deputy Prime Minister and Minister of Economy and Finance Keat Chhon and ADB Country Director Eric Sidgwick, the agreements cover the Climate-Resilient Rice Commercialization Sector Development Program (Rice-SDP) and the subprogram II of the Finance Sector Program III (FSP III).

“Rice-SDP supports the Government’s Policy on the Promotion of Paddy Production and Rice Export, which calls for improved seeds, more efficient irrigation, better farming practices, greater drying, storage, and milling capacities, and better marketing, thereby transforming Cambodia’s rice subsector from subsistence farming to commercially-oriented value-chains,” said Mr. Sidgwick.

In addition to ADB’s loans of $55 million, the Rice-SDP has mobilized $24.1 million of cofinancing: a $14.6 million grant from the Trust Fund for the Global Agriculture and Food Security Program, and a $4.5 million grant and a $5 million loan from the Strategic Climate Fund.

Rice-SDP, which will run until 2019, will improve crop productivity, access to credit by paddy producers and rice millers/exporters, access to regional and international rice markets, and enhance national and household food security. Rice-SDP will also support legal and regulatory reforms to promote local seed production and distribution, strengthen agricultural land management, improve capacity of farmers’ organizations, promote contract farming, and encourage domestic trading and export of milled rice. Paddy drying and storage facilities constructed under the program, to be operated by public-private partnerships, will ensure better quality paddy for processing and higher added value in Cambodia.

The investment part of Rice-SDP will cover Battambang, Kampong Thom, and Prey Veng provinces, among the largest rice producing areas in the country. An efficient rice value chain and increased productivity will benefit about 1 million low income rice farming households, with each expected to gain additional income of $300 a year by 2020.

The $15 million subprogram II of the FSP III will further improve the legal foundation for financial institutions to sustain financial stability; enhance market confidence; strengthen legal frameworks for development of security market and insurance industry; modernize payments and clearance system; support the development of a commercial dispute resolution mechanism; and promote transparency and measures to combat money laundering and the financing of terrorism. This will build a growing, resilient, and efficient financial system that supports sustainable economic growth and poverty reduction mechanisms.

FSP III comprises a series of three single-tranche subprograms to be implemented from December 2010 for three to four years. The first two phases of the FSP, worth more than $75 million, have contributed new and increased loans of $1.52 billion, the creation of more than 12,000 jobs, and the opening of more than 980 new branches of banks and microfinance institutions throughout Cambodia.