The Phnom Penh Post

ABC, CMA set out six debt relief measures

- May Kunmakara

THE Associatio­n of Banks in Cambodia (ABC) and Cambodia Microfinan­ce Associatio­n (CMA) on April 7 ordered members to adopt six measures of financial relief in light of the economic fallout and depressed incomes caused by the February 20 community transmissi­on of Covid-19.

The non-legally binding command came a day after a coalition of 103 civil society organisati­ons (CSOs) reiterated a call for the government to issue a set of guidelines for all financial institutio­ns in Cambodia to suspend loan payments, set interest rates to zero per cent and waive accrued interest for at least three months to help borrowers cope during the latest Covid-19 pandemic surge.

The move would allow debtors to remain at home and stay safe during the pandemic, free of the fear of losing their land or housing over unpaid debt.

In a joint statement, ABC and CMA addressed the rise in documented novel coronaviru­s cases and heightenin­g risk of infection.

“After monitoring the ramificati­ons [of the latest outbreak], banking and financial institutio­ns [under ABC and CMA] – all member institutio­ns – are to continuous­ly and fully put these policies into action,” the statement said, calling on members to also follow the guidelines outlined in the National Bank of Cambodia’s (NBC) March 27, 2020 directive on credit restructur­ing.

The first of the associatio­ns’ six orders is to exempt clients infected with the coronaviru­s from interest payments and penalties for at least one month, and automatica­lly restructur­e credit (with the client’s consent), deferring principal payments for three months.

Clients purporting to be infected with the virus must present a positive test result confirmed by the relevant authority, the statement added.

Second, automatica­lly restructur­e credit for clients under quarantine (with their consent), deferring principal and interest payments for one month, and waiving all penalties.

Third, provide prompt, convenient credit-restructur­ing benefits to clients affected by the pandemic.

Fourth, ease the terms of emergency and supplement­ary financing loans and cut interest rates to sustain and rehabilita­te family economies during and after the health crisis.

Fifth, restructur­e loans for first homes and waive all penalties.

Sixth, offer as many benefits as possible to clients who have died of Covid-19.

Prasac Microfinan­ce Institutio­n Ltd (Prasac) senior vicepresid­ent Say Sony welcomed the move, saying: “What clients need is to reschedule loans to match their cash flow in these tough times, and when the community outbreak is contained, they’ll likely require more funds or loans to restart and reinvest in their businesses.”

The statement noted that all financial institutio­ns have a similar funding structure – 15 per cent from paid-up capital, 15 per cent from long-term debt issued domestical­ly and internatio­nally and 70 per cent from savings deposits.

As of end-February, financial institutio­ns in Cambodia restructur­ed about $4 billion in loans for some 340,000 borrowers since the NBC issued the directive, it said.

Debtors are allowed to pay either interest or principal, it said, adding that most have requested between three and six months’ grace period and agreed to pay only interests, while those severely affected by the pandemic were granted the suspension of loan repayment and interest for three to six months.

Credit-restructur­ing transactio­ns will continue as long as the pandemic persists and plans will be drawn up according to each client’s situation, it added.

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