Logo of Phnom Penh Post newspaper Phnom Penh Post - Warning for illegal MFIs

Warning for illegal MFIs

Warning for illegal MFIs

The governor of the National Bank of Cambodia hit out at unlicensed microfinance institutions or lenders, who he said were the reason why interest rates in the sector were high, despite interest rates falling among registered lenders.

Chea Chanto, governor of the National Bank of Cambodia’s (NBC), said high interest rates from unlicensed lenders were resulting in repayment issues for debtors who were losing their property and even migrating.

“The main reason of high interest rates is from the operations of NGOs, associations, and unofficial lenders, which are not under control and have not registered with NBC for taking profit via rural loans,” Chanto said at a workshop with the Ministry of Economy and Finance and the central bank in Siem Reap yesterday.

He said that many of these unlicensed lenders behave like legal MFIs and charge high interest rates, without doing much research into whether these loans should be approved or not.

The governor encouraged these institutions, individual unofficial lenders and NGOs to get registered, or face the legal consequences.

Stephen Higgins, a managing partner at Cambodia-based investment firm Mekong Strategic Partners, said unlicensed lenders have given the sector a bad reputation.

“Unlicensed money lenders do tend to charge much higher rates,” Higgins said.

He added that the average rate on microfinance loans was 24.7 per cent last year, down from 33 per cent in 2008.

“At 24.7 per cent, it’s amongst the lowest globally. So, Cambodian microfinance customers are getting a very good deal compared to other countries.”

Sim Senacheert, president and CEO of microfinance institution Prasac, said the announcement will help bring down the number of unlicensed lenders in the sector.

“We are happy because they can get registered and operate in a fair market.

But, we are not concerned with that because they have a very small market share,” he said.

Cambodia had 39 licensed MFIs and 38 registered rural credit operators nationwide at the end of 2014.

Loan portfolio of the MFIs reached $2 billion across 1.8 million customers, according to NBC’s 2014 annual data. .

MOST VIEWED

  • Ethnic group ‘disappointed’ to be denied French visas to attend court

    Eleven people at the centre of a case involving seven indigenous Bunong villages in Mondulkiri province pursuing legal action in France have expressed disappointment after the French embassy in Phnom Penh denied their visa applications to attend court. A press release said the 11 included a

  • EBA withdrawal provides ‘opportunity for growth’

    Economic analyst Khoun Bunny said on Tuesday that the loss of the EU’s preferential Everything But Arms (EBA) agreement could be a golden opportunity for Cambodia to show it deserved to be ranked sixth on the list of the world’s fastest-growing economies. Government

  • Malaysia MP accused of ‘influencing law’

    Malaysian Member of Parliament (MP) Larry Sng arrived in Siem Reap early on Wednesday, in what was slammed by one NGO as efforts by Kuala Lumpur to “influence Cambodian law”. The Malaysian Embassy in Phnom Penh requested on January 30 “cooperation from the Ministry of Foreign

  • Ministries begin measures to offset EU’s EBA decision

    In the wake of the EU’s controversial announcement this week that it has begun the withdrawal process for Cambodia’s Everything But Arms (EBA) preferential agreement, government ministries and political analysts continued to share their reactions and economic mitigation plans in preparation for the