The Ministry of Rural Development (MRD) announced yesterday that it plans to support the growth of NGO-backed community saving groups in a move to help members of these currently unregulated groups establish funding pools that can be accessed without the need for collateral.
Speaking at an Oxfam-sponsored conference on the informal saving and lending practice yesterday, Rural Development Minister Ouk Rabun said community saving groups have encouraged even the Kingdom’s poorest to save and invest.
Rabun added that the ministry will provide technical and financial support to community saving groups and is studying how it can help them become legally recognised.
“The ministry is studying the possibility of an actual mechanism that would allow community saving groups to operate legally,” he said. “MRD is also planning to allocate part of its national budget to support the development of community saving groups at the provincial level.”
However, the minister did not release details for a specific timeline of implementation or a set of terms and conditions necessary for the groups to be legally recognised.
While there is no official data on the number of active community saving groups across the country due to the fact that they operate unofficially, the MRD has signed a memorandum of understanding (MoU) with 11 NGOs that facilitate access to these groups. In total, the 11 NGOs have created 12,475 community saving groups with over 222,000 members and a savings portfolio valued at $11.3 million, according to Rabun.
Lim Solinn, Oxfam country director, welcomed the ministry’s support to legalise the community saving groups, explaining that it would help build trust and confidence in the savings and lending practice as it continues to grow. However, she suggested that any regulation should exclude scrutiny over NGOs that operate groups with 50 members or less due to the relatively small amounts of money handled.
She added that even the poorest members of community saving groups on average save $66 a year.
“There are many success stories [with community saving groups] up till now,” she said. “The implementation of them has empowered economic activity for women and in the agricultural sector by allowing them to obtain more financial services.”
Previously, the National Bank of Cambodia and the Ministry of Interior called on NGO-backed lending operations to register with the central bank in a move to regulate them under the contentious Law on Associations and Non-Governmental Organisations (Lango).