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Microfinancers, banks issue joint statement in defense of industry lending practices

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A microfinance institution employee organises money for a customer loan at a Phnom Penh branch in 2014. Hong Menea

Microfinancers, banks issue joint statement in defense of industry lending practices

The Association of Banks in Cambodia and the Cambodia Microfinance Association (CMA) issued a joint statement on September 16 rejecting a research report compiled by local NGOs with the support of Germany’s Federal Ministry for Economic Cooperation and Development (BMZ).

LICADHO, Equitable Cambodia and FIAN issued a joint statement on the debt situation of the Cambodian people and the influence of microfinance institutions in Cambodia on September 14.

Their report alleges that widespread negative societal impacts have been caused by the practice of micro-lending in Cambodia and the lending industry and that many people have lost their land or homes that they had put up as collateral, typically because they were forced to sell them in order to repay the loans rather than through asset seizure.

However, according to the Association of Banks in Cambodia and the CMA, the number of people who had to liquidate property to pay off loans has amounted to just 1.2 per cent of borrowers per year.

“And not all of these land sales represented economic and social bankruptcies of the client's family, but were partly done in response to the evolution of land prices in Cambodia,” the statement said.

The CMA also mentioned the positive contributions made to society by the availability of consumer credit, emphasising that it was not the main factor driving child labour or migration.

The CMA asserted that, on the contrary, most credit customers have enjoyed many positive benefits, including increased income and land ownership.

“We greatly regret that some institutions publicized these statements focused only on the negative aspects [of lending] that failed to provide balance by leaving out the positive information [from the BMZ study] in the contents of their report, thereby leading to confusion among the public,” the joint statement added.


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