NGOs to be grilled over MFI report

Taing Vida / Khmer Times No Comments Share:
Customers wait to apply for microfinance loans in the capital. A recent NGO report accusing the sector of preying on borrowers has been called into question by the National Bank of Cambodia and government. KT/Chor Sokunthea

The National Bank of Cambodia and government yesterday cast doubt on a recent NGO report on microloans, demanding that those behind the critical claims provide evidence to support them in a closed-door meeting.

The demand follows a report by Licadho and Sahmakum Teang Tnaut on August 7 that stated more than two million Cambodians held a total of $8 billion in outstanding microloans, about one-third of the Kingdom’s gross domestic product.

The report featured seven case studies of abuse, chosen from 28 MFI clients. The interviews were conducted in 10 communes in the provinces of Kandal, Kampong Cham, Tboung Khmum, Prey Veng and the city of Phnom Penh.

Roth Sovanarak, general director of the NBC’s banking supervision division, demanded the two NGOs provide strong evidence that microloans have harmed borrowers in the Kingdom.

Mr Sovanarak said the report surveyed 28 micro-finance clients who failed to pay loans and encountered problems, noting that it does not represent 2.1 million borrowers in the Kingdom.

“These are unsuccessful borrowers. They are not representative of all borrowers in the Kingdom,” he said. “As far as I know, all MFIs are now well-managed. We need more evidence to verify if these borrowers were being abused.”

Representatives from the NBC, a microfinance institution, government and RAC hold a press conference yesterday over microfinance lending in the Kingdom. KT/Siv Channa

Government spokesman Phay Siphan said representatives of the two groups have been called for a closed-door meeting where they are expected to defend their report.

“I consider the report as opinions of the two rights groups,” Mr Siphan said. “I will ask all relevant parties to sit down and discuss the problem.”

“I would also like to prevent politically motivated reports from spreading in the country,” he added.

Am Sam Ath, a senior investigator with the rights group Licadho, yesterday said he welcomes the invitation.

“We had no intention to damage the image of MFI lending,” Mr Sam Ath said. “We clearly stated in our report about our sample and the areas where the research was conducted.”

“I will cooperate and I welcome any invitation to discuss the issue,” he added.

Keo Borann, president of the Cambodian Microfinance Association and CEO of AMK Microfinance Institution, yesterday said MFIs, like banks, follow strict lending guidelines.

“Before giving loans, CMA members thoughtfully conduct studies on borrowers and evaluate whether they can pay back the loan. We have clear policies,” Mr Borann said. “In some instances, such as flooding, we extend payment deadlines and offer additional loans to borrowers.”

Sok Touch, president of the Royal Academy of Cambodia, yesterday cited a study he did in nine provinces, where 1,000 borrowers were interviewed. Mr Touch said only one percent encountered problems repaying their loans.

“I think the concerns raised by the rights groups were politically motivated because they targetted borrowers who failed to pay their loans,” he said. “The report is unacceptable.”

Mr Sovanarak also noted that NBC has long had hotlines to provide consultative services to people seeking advice and for people to report problems in the financial sector. He said consultation can be accessed through five hotlines in Phnom Penh and 21 in the provinces.

“Through the hotline numbers, people can ask questions regarding microfinance institutions,” he said. “If there is a case of exploitation, report it to us and we will take action.”

Mr Sovanarak said the NBC has requested the Education Ministry to add financial literacy in study programmes.

“I assume that we all acknowledge that rural residents who lack financial literacy are targets for unscrupulous, unofficial financial service providers,” Mr Sovanarak added. “It’s compulsory to educate people about deposits and interest rates so they would not fall to cheaters.”

WATCH: The Government Spokesperson Unite hold a press conference about the situation of micro finance referring to the Licadho report.KT/ Pho Vy

Posted by Khmer Times on Wednesday, 28 August 2019

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