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

  • School reopening to be postponed until November

    Minister of Education Hang Chuon Naron on Tuesday wrote to Prime Minister Hun Sen requesting a delay of school reopening across the Kingdom until November, when the new academic year begins. In his letter, Chuon Naron said the postponement is warranted to avoid the new

  • Foreigners in Kingdom must now register in FPCS system

    The Ministry of Interior’s General Department of Immigration (GDI) announced that it would not grant visa extensions to foreigners staying in Cambodia if their names are not listed on the Foreigners Present in Cambodia System (FPCS) by July 1. Foreign nationals can register in the

  • Covid-19 at ‘alarming rate’, health ministry says

    The Covid-19 risk level for individual transmission is at an “alarming rate” in the Kingdom and its probability is “not low”, warned Health Ministry spokesperson Or Vandine. “Cambodia’s coronavirus scenario is classified as being at an early stage of the pandemic because of ongoing

  • Mandatory quarantine for 30,000 workers begins

    Some of the roughly 30,000 workers from factories and enterprises across the Kingdom who went on leave during Khmer New Year began their government-imposed 14-day quarantine on Monday. Speaking at a press conference while visiting workers at the Phnom Penh Special Economic Zone on Monday, Ministry

  • Unemployed to get $40 per month

    The Ministry of Labour and Vocational Training has instructed enterprises, business owners and travel agencies in five provinces to prepare the proper forms for the suspension of employment contracts. This, it said, will make it easier for the ministry to transfer $40 a month to workers

  • Gov’t travel ban flouted

    While the majority of Cambodians have paid heed to Prime Minister Hun Sen’s order to stay put and not travel during the Khmer New Year – the holidays of which were also postponed – several hundred have left Phnom Penh nonetheless. They have allegedly breached provincial

  • G20 energy ministers struggle to finalise oil output cuts

    Top oil producers struggled to finalise production cuts during a virtual summit held by Group of 20 (G20) energy ministers on Friday, despite US President Donald Trump’s mediation efforts to end a standoff with Mexico. The final G20 communique appeared to gloss over simmering divisions

  • Kingdom revises travel restriction order

    The government on Friday eased the district and provincial border restrictions issued on Thursday. People are now allowed to cross districts within their provinces. Phnom Penh and Kandal province are to be treated as a single region where people are allowed to travel freely. In

  • Private schools struggling

    The Cambodian Higher Education Association has claimed that 113 private educational establishments are facing bankruptcy because of their inability to pay rent and staff salaries in light of nationwide school closures caused by the Covid-19 outbreak. It said the financial trouble started when the Ministry of

  • Khmer New Year holidays postponed

    In an effort to halt Covid-19 infections in the Kingdom, Prime Minister Hun Sen has postponed the Khmer New Year holidays scheduled from April 13 to 16. While the people will not have their usual break, nor will there be any public celebrations or gatherings at pagodas,