Cambodia: MFI Players to Boost Financial Inclusion in Kingdom

Feb 2020
Cambodia, February, 05 2020 - Cambodia Microfinance Association (CMA) announced the launch of a financial project with the goal of helping Cambodian people to access formal financial services through education, providing the microfinance sector with sustainable growth.

The Responsible Inclusive Finance project, which will cost nearly $1million, will be funded by CMA members and implemented within three years. It is aimed at addressing concerns by helping people to understand formal financial services better.

It said the project will also promote available, affordable and responsible financial services and products to people, saying this pilot project will contribute to the National Bank of Cambodia’s 2010-2025 Financial Inclusion Strategy.

“The project implementation will involve close work with our microfinance provider members, key partners, and stakeholders such as the central bank, the Association of Banks in Cambodia, the Credit Bureau of Cambodia and other development partners,” CMA said in a statement. The Microfinance Institution [MFI] association now has more than 101 members, including rural credit institutions and leasing companies.

Kea Borann, CMA chairman, said the project comes in addition to ongoing efforts by the association since 2017.

“We expect the project will increase financial inclusion using international ethical standard practices such as client protection principles, social performance management, lending guidelines and client hotlines,” said Kea.

In addition, he said it will further promote financial education among the public, raise awareness of the role of the MFI towards poverty reduction, especially among rural clients, while focusing on research and development of the MFI sector.

As of last year September, the MFI sector provided $7 billion in credit to 2.2 million Cambodians, while 2.7 million people deposited a total of $3.6 billion, CMA data showed.

“The financial sector has notably increased in the last 10 years. The credit portfolio has increased 18 times, while the number of clients grew by 2.2 times over the period,” said Kea.

A report called Collateral Damage from rights groups Licadho and Sahmakum Teang Tnaut issued last August said the rapid rise in small loans for poor Cambodians has led to more debt, with many rural families forced to sell land, migrate or put their children to work.

The report featured seven case studies of abuses, chosen from the 28 MFI clients the two groups had interviewed in 10 communes in Kandal, Kampong Cham, Tboung Khmum and Prey Veng provinces, as well as Phnom Penh.

High interest rates, the use of land titles as collateral and pressure to repay loans have led to a predatory form of lending by microfinance institutions, the report said.

“MFI employees ordered clients to sell land and threatened legal action if they did not, a threat that was taken seriously by clients due to the fact that MFIs physically take possession of their land title,” it pointed out.

CMA said the report does not present anything close to the full picture of MFI lending in Cambodia and noted that the report’s authors acknowledged in their methodology that they had selected their sample of 28 case studies based solely on negative outcomes from MFI borrowing, presenting an inaccurate picture that does not reflect the true state of microfinance lending.

Source : Khmer Times

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