National Bank of Cambodia slams NGOs’ lending report
THE National Bank of Cambodia (NBC) on Thursday slammed a report on predator y lending in t he Kingdom by local human rights NGOs Licadho and Sahmakum Teang Tnaut (STT), which was released on Wednesday, as “flawed”.
The report, entit led Collateral Damage, claimed t hat increasing levels of debt caused by ta k ing loans f rom microfinance institutions (MFIs) is forcing rura l families to sel l of f t heir la nd.
The Cambodia Microfinance Association ( CMA) said t he report on predator y lending paints a distorted picture and ignores significant contributions to povert y a llev iation and financial inclusion by MFIs.
On Thursday, NBC directorgenera l Chea Serey said: “We have issued many rules and regulations on responsible lending and have ta ken an active role in promoting financial literacy to empower consumers.
“We agree with the CMA t hat there are flaws in the report. The practice cannot be genera lised to the whole industr y based on such a small sample size.”
While the NBC did not reject the report in its entiret y, she stressed
t hat: “The report’s claims do not reflect rea lit y and needed to be reinvestigated.
“Nonetheless, this doesn’t mean that we will ignore the 28 [MFI clients inter v iewed for the report who were] af fected if it is found to be t r ue.
“We would appreciate it i f t he aut hors of t he report and t he organisations who compiled it would come forth with ev idence of such practices so that we can ta ke the necessar y action.”
The findings were compiled from 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.
The CMA said with only 28 case studies presented out of close to t wo million loans currently on the books of the Kingdom’s MFIs, the report does not represent any thing close to t he f ull picture of MFI lending in Cambodia.
“The CMA takes reports of unet hica l or predator y lending practices ver y seriously and we will work with our members to investigate t he case studies presented in t he report.
“But we are extremely concerned t hat t he report relies on such a
small sampling of MFI borrowers in Cambodia and also that none of our members, or the association itself, was contacted by the report’s authors during the course of their work,” CMA chairman Kea Borann said.
The Cambodian microfinance sector has proven to be one of the most successful models for financial inclusion worldwide, said the CMA.
The World Bank’s Cambodia Microfinance Policy Note published in October states that growth in microcredit is having positive financial and welfare impact for households in Cambodia, said the CMA.
It said expansion of the microfinance sector has made it possible for borrowers to shift from informal to formal sources of credit, especially among the poor.
Licadho monitoring manager Am Sam Ath told The Post on Thursday that despite the small scale of the study, it presents evidence that should urge the government and MFIs to control lending and guarantee that it does not abuse human rights.
“The report is not suggesting that microfinance institutions stop lending to people. It just wants to ensure that lending is transparent and in line with the government’s development plans to eradicate poverty,” he said.