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MFIs Tackle Over-Indebtedness

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MFIs have a duty of care to explain to their clients the implications of overindebtedness if they are unable to pay back their loans. KT/Fabian Mouret

Clients of microfinance institutions (MFIs) in the Kingdom can now expect some form of protection from over-indebtedness that arises from their inability to meet their financial obligations on time as agreed in a credit agreement.
Hout Ieng Tong, chairman of the Cambodia Microfinance Association, made this announcement on Monday at the press conference to present certificates to MFIs that implemented the Client Protection Principles (CPP).
“The CPP help microfinance institutions practice good ethics and smart business. These principles are the best practices adopted from international networks and national MFIs to develop pro-client codes of conduct and practices,” said Mr. Ieng Tong.
He pointed out the CPP made clear that the financial products and services offered by MFIs are appropriate to client needs and do no harm.
“MFIs have a duty of care to explain to their clients the implications of over-indebtedness and how they can go into such situations if they spend more money than they earn and are unable to repay their loans. In such circumstances, the debt becomes a major burden for the MFI client which contributes to their social and financial exclusion and poverty,” said Mr. Ieng Tong.
“There will be stringent assessments by MFIs before giving loans to customers to make sure these financial institutions don’t over lend and cause their clients to go into serious debt,” he added.
When clients clearly understood the CPP, said Mr. Ieng Tong, they would not use the services offered by microfinance institutions that are non-CPP compliant.
The global Smart Campaign, an international movement committed to embedding client protection practices into the microfinance industry, recently announced that VisionFund, Amrit Microfinance Institute, Hatta Kaksekar Limited and Sathapana Bank Plc were awarded CPP certificates.
Mr. Ieng Tong in presenting the CPP certificates to the three MFIs and Sathapana Bank said they were among 62 small financial institutions in the world that won accolades from the Smart Campaign.
The CMA, he said, was now supporting 10 MFIs to receive CPP certificates based on the recommendations of the Smart Campaign.
Adrian Merryman, CEO of VisionFund Cambodia, said his MFI was committed to the Smart Campaign’s CPP.
“As part of VisionFund’s commitment we will continue to improve the training of our staff to serve our customers more effectively,” said Mr. Merryman.
Bun Mony, CEO of Sathapana, said the CPP protected customer’s rights and championed their interests.
“All MFIs should adhere to the CPP. If they do, the country’s microfinance industry will be in good health and also become sustainable,” he said.
“The CPP will prevent our clients from going into over-indebtedness. We cannot succeed when our customers fail,” he added.

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