The National Bank of Cambodia (NBC) announced on Friday that it is seeking to cooperate with relevant stakeholders to crack down on illegal lenders. It also alerted the public about the dangers of taking cash loans from unfamiliar sources.
The NBC’s message noted that illegal lenders were boosting their loan advertisements on social media, distributing contact cards and sending messages to promote their products.
“Customers may fall into a debt spiral due to very high interest rates and other additional fees compared to legal institutions. Illegal lenders might confiscate customers’ property without going through the court,” its press release said.
NBC’s director-general’s Chea Serey could not be reached to elaborate on the issue.
The alert follows a similar warning by the Cambodia Microfinance Association in May.
Advertisements for easy cash loans have been growing more prevalent on social media recently, apart from decorating walls, lamp posts and the backs of tuk-tuks with their posters.
Often the services offered collateral-free loans, but interest rates were often kept secret.
While loans offered by unlicensed institutions are very risky, Ngeth Chou, senior consultant at Emerging Markets Consulting, said the NBC should take serious action rather than just make announcements to control the issue.
“Our people still have poor financial knowledge. This means we need financial regulators to work actively to protect the public."
“If we allow unlicensed operators to offer the same services, it becomes unfair to legal institutions and does not encourage the illegal ones to join the formal sector,” he said.