A “Standard of Loan Agreement” for the financial sector is under preparation, and institutions are expected to begin adopting its principles by June. But insiders and observers have expressed differing views on the precise provisions of the instrument, its potential effects on market competition, and where the common ground should be.

The instrument – also referred to as the “Standard Contractual Terms and Standard Contract” guidelines – is being developed by the Association of Banks in Cambodia (ABC) and Cambodia Microfinance Association (CMA), which jointly initiated the standard last year.

The instrument’s provisions are intended to apply to all financial institutions, including commercial and specialised banks, microfinance institutions (MFI), deposit-taking MFIs (MDI), and leasing companies, according to Sok Voeun, chairman of the CMA as well as the ABC’s Financial Inclusion Committee.

He disclosed that the standard is meant to ensure that loan contracts are nearly identical across the board, with the notable exception of interest rates and related fees.

ACLEDA Bank Plc president and group managing director In Channy lauded the work going into the development of the standard as well as its adoption, highlighting the protections it could provide for lenders and clients, and expressing optimism for the creation of a more even playing field.

“Eliminate unfairness on the playing field. With the same standards and norms, things will be easier for the general consumer,” he enthused.

However, prominent economist and financier Ngeth Chou believes that loan terms and conditions should vary in different circumstances, which he said would engender healthy competition in the financial sector.

“Institutions have different particulars – such as degrees of flexibility – as per their business models, just as some have more branches than others,” he said, pointing out that lenders’ geographical coverage of operations can also influence their methodologies.

“Each institution’s loan terms should absolutely be flexible,” he stressed.

“What’s more, we’re still unsure about the goals of such a [standard],” Chou admitted.

The CMA’s Voeun says that financial institutions could begin adopting the “Standard of Loan Agreement” by the end of the second quarter of the year.

Similarly, the ABC, CMA and Cambodian Association of Finance and Technology (CAFT) jointly developed a new code of conduct aimed at ensuring transparency, building trust and strengthening consumer protection in the financial sector.

The latest version of the Banking and Financial Institutions’ Code of Conduct (BFI CoC) was formally signed and implemented on March 4 by the three industry bodies.

The inaugural edition of the BFI CoC was established in February 2015 by 15 banks operating in Cambodia in an effort to strengthen customer and environmental sustainability safeguards within the Kingdom’s banking system, according to Voeun.

Recently, the Ministry of Commerce and National Bank of Cambodia (NBC) jointly issued a “Press Release on the Implementation of the Law on Consumer Protection and Prakas on Unfair Contract Clause in the Banking and Financial Sector” to promote economic stability and instil confidence among investors and the general public.

The government institutions noted that the release – dated March 24 – was prompted by recent incidents of “business operators” using contracts that have “embedded [therein] some hidden meaning and unfair clauses in order to excessively exploit benefits from consumers”.

“The use of a standard form of contract by certain business operators does not grant consumers the power to modify or amend any of the contract’s clause[s] or conditions to safeguard the consumer’s legitimate interests,” the release noted.

It explained that the ministry adopted the prakas, specifically Prakas No 0067 PNA/KBB/PRK dated March 1, 2022, to complement the consumer protection law and better grapple with “unfair clauses that reap the benefits from the consumers”.

It also encouraged the general public “to report any excessive exploitation caused by the establishment of unfair standard forms of contract by business operators to the Consumer Protection Competition and Fraud Repression Directorate General [CCF]”.