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Central bank fines MFI for shady lending

The headquarters of Cambodia’s central bank in Phnom Penh in May 2016.
The headquarters of Cambodia’s central bank in Phnom Penh in May 2016. Heng Chivoan

Central bank fines MFI for shady lending

The central bank announced on Friday that it has fined an unnamed microfinance institution (MFI) $100,000 for engaging in non-transparent lending practices.

Chea Serey, director general of the National Bank of Cambodia (NBC), confirmed to The Post that an MFI had been penalised “for not complying with customer protection principles”, though she did not provide any additional information on the identity of the institution or its transgression.

She added, however, that the central bank has launched a new dedicated hotline for customers to report any grievances concerning the lending practices of banks or MFIs.

“In light of the many complaints regarding some people [claiming that they] faced unfair treatment from banks or microfinance [institutions], the NBC has launched a dedicated consumer unit and four telephone lines to listen to those people directly,” she said in an email.

She added that previously bank and MFI customers had complained but without providing evidence or witnesses, and usually just on hearsay.

“We can’t act without proof or witnesses,” she said.

Bun Mony, adviser to the Cambodia Microfinance Association, said that he was not aware of any of the association’s 62 members being fined by the NBC. However, he said the central bank should be cautious in how it handles complaints submitted through the new hotline.

“I am afraid that some customers might be using the system to complain to the regulator inappropriately,” he said. “There are several cases that loan takers criticise [us] unreasonably or have baseless complaints.”

Ngeth Chou, a senior consultant at Emerging Markets Consulting, said if an MFI wilfully broke regulations on transparent lending then it was a positive sign that the central bank was actively working to protect customers. However, he said many of the NBC’s regulations were poorly worded or unclear, and lending institutions might not fully understand them while customers were almost certainly in the dark.

As an example, he cited the NBC’s terse announcement on Friday that it had fined an MFI $100,000 for non-transparent lending without naming the institution nor the explaining the nature of the infraction.

“The term transparent lending is unclear for the public,” he said. “The NBC may be referring to any existing regulations or prakas, but that isn’t useful for the public. Thus, offering contact numbers is not helpful.”

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