Central Bank Takes Aim at Unlicensed Lenders
Chea Chanto, Governor of the National Bank of Cambodia (NBC), the Kingdom’s central bank, warned that high microfinance interest rates and the “exploitative” practices of unlicensed lenders were pushing citizens deep into debt.
“Even though microfinance interest rates are decreasing continuously, the NBC is still concerned about high interest rates, which cause debtors unable to pay back their loans to lose their assets and homes,” he told a seminar in Siem Reap yesterday.
He said the main reason behind these high interest rates was the operational activities of certain non-governmental organizations, association and middlemen that offer informal lending outside the purview of the central bank. These unregistered lenders were “created to derive profit from offering micro-credit to rural people.”
Mr. Chanto accused informal lenders of gouging consumers with high interest rates, while exploiting their lack of understanding of interest rate calculations.
“They have made loans convenient for debtors without properly analyzing the ability of clients repay their debts,” he said. “This convenience has motivated people to accept loans from many sources and, as a result, they were unable to repay their debts. Their collateral, including land, farms and houses, is then seized by the middlemen and NGOs.”