Report: MFI loans force land sales, increase in child labour
AR EPORT from loca l human rights NGOs Licadho and Sahmakum Teang Tnaut (STT) claimed that t he increasing levels of debt caused by taking loans from microfinance institutions (MFIs) is forcing r ura l fa milies to sell of f la nd.
The study a lso claimed that the sharp rise in debt had led to migra
tion and human rights abuses such as child labour exploitation.
However, Bun Mony, the deputy chairman of the Cambodia Microfinance Association slammed the report. He denied that MFIs forced debtors to sell of f assets, and warned that people were at risk from unscrupulous unlicensed money lenders.
The report said: “This form of lending has significantly boosted revenue for microfinance institutions and t heir foreign loan partners, but it has negatively impacted t he securit y of people’s land ownership, especia lly in v ulnerable communities.”
The report was conducted in 10 communes in Kandal, Kampong Cham, Tbong Khmum and Prey Veng prov inces, as well as Phnom Penh, with 28 MFI clients inter v iewed.
Supreme National Economic Council senior adv iser Mey Kalyan said the research was narrow in its scope and did not reflect t he rea lit y of the Kingdom’s financial sector.
“In genera l, t he information will not be accurate if a study is only conducted in certain areas,” he said.
The Licadho-STT report a lso claimed t hat an interest rate cap of 18 per cent per year did not reduce interest rate volume.
In March 2017, the National Bank of Cambodia (NBC) announced a policy requiring a ll MFIs to lend at rates no higher than 18 per cent per year. The move came follow ing an order from Prime Minister Hun Sen.
Licadho monitoring manager Am Sam Ath said that of the 28 debtors
trade barriers.
The battle has sapped business confidence and undermined both countries’ manufacturing sectors just as the world economy’s slowdown worsens.
Activ it y in t he US ser v ice sector hit a three-year low last month, sur vey data showed on Monday, confirming a stepdown in US economic grow th.
Trump’s move was also sudden: On the campaign trail, he had loudly pledged to designate China a currency manipulator but his administration had unti l Monday refrained from doing so.
The Treasur y Department had instead kept China on a “monitor i ng l i st ” of countries subject to close scrutiny due to t heir currency practices, including in its most recent report released in May.
The y uan is not freely convertible and t he gover nment l i mits its movement against the US dollar to a t wo per cent range on eit her side of a centra l parit y rate which the People’s Bank of China (PBOC) sets each day to ref lect market trends and control volatilit y.
“It appears t hat t he ta rif fs hi ke suggests t he return of tit-for-tat moves and a suspension of t rade ta l k s, a nd t he PBOC sees no need to keep the y uan stable in t he nea r ter m,” Ken Cheung, a sen ior cur renc y st rateg ist at Mizuho Bank, told Bloomberg News.
In a statement on Monday morning, the PBOC said the exchange rate against the US dollar had been “affected by unilater a l i sm a nd t r ade prote c t ion i sm measures a nd t he imposition of ta r if f increases on China.”
T he c ent r a l ba n k s a id t he y ua n remained “stable and strong against the basket of currencies” and said it would “resolutely crack dow n on shor t-ter m speculation and maintain stable operation of the foreign exchange market and stabilise market expectations.”
It went on to say t hat it had t he “experience, conf idence and abilit y to keep the RMB exchange rate basica lly stable at a reasonable and balanced level.”
Julian Evans-Pritchard, senior China economist with Capital Economics, said the PBOC has “effectively weaponised t he exchange rate” by linking t he currency with the US trade war.
“Given that their goal is presumably to of fset some of t he i mpact f rom additiona l US ta rif fs, t hey are likely to a llow the currency to weaken further, probably by 5-10 per cent over t he coming quarters,” said Evans-Pritchard.