The National Bank of Cambodia on Wednesday announced it is revoking the licenses of 11 rural credit institutions and rejecting license applications from 12 other credit organisations.
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In January, NBC made a similar announcement, suspending the licenses of 11 MFIs on the grounds that they failed to abide by the regulations set by the central banking authority.
Bun Mony, chairman of Vithey Microfinance, welcomed the measures, arguing that the microfinance industry is beset by bad practice, including businesses that operate without a license or charge excessive interest rates.
“We support the Central Bank in its decision to deny and revoke licenses in the sector,” he said. “There are some rural credit organisations that earned a license and are not actually operating, and there are some who are operating without a license and charging high interest rates.”
“Other companies voluntarily gave up their licenses so they can operate in the black market without paying taxes.”
In March, NBC set an interest rate cap of 18 percent per annum for microfinance institutions, deposit-taking MFIs and licensed rural credit institutions to help the poor, curb over-indebtedness and reduce poverty. According to Mr Mony, however, many rural credit institutions throughout the country are struggling to keep afloat after the new interest rate cap came into effect in April.
In March, NBC called on provincial authorities to crack down on rural credit institutions luring clients to make deposits under the promise of high interest rates.