Logo of Phnom Penh Post newspaper Phnom Penh Post - Government should impose MFI interest caps

Government should impose MFI interest caps

Government should impose MFI interest caps

Dear Editor,
I read the article "Microfinancier backs high rates" (August 20) with great concern.

Does the legal framework that allows microfinance institutions (MFIs) and other credit operators to charge interest really assist the poor in improving their incomes and livelihood?

Very recently, I conducted a small survey on the level of debt among farmers in three villages in Prey Veng province.

Of the 63 households interviewed, 52 were indebted to at least one MFI, with an average debt of US$300 per household. Generally, they paid 3 percent per month for the loan. Between 20 and 30 percent of those households used loans for non-productive and survival needs, such as buying food and paying for medical treatment.

MFIs, rural credit operators and NGO credit programmes need to obtain a license from the National Bank of Cambodia (NBC). A spokesman for the NBC, the national body in charge of regulating all commercial banks, MFIs and credit operators, recently said: "Cambodia is a free market and the central bank cannot intervene. Rates should be set by lenders and borrowers."

A spokesman for the Cambodia Microfinance Association agreed, saying: "If the rates are too high and the market cannot accept them, then we wouldn't be able to disburse the loans." He also noted that interest rates were "anywhere from 28 percent to 34 percent per annum". This rate is set by the MFI, and any borrower must agree to it before taking out a loan.

Apart from informal credit, which charges usurious interest, most people have no other option but to agree to the interest rates set by MFIs and other credit operators.

I would like to appeal to the government to introduce laws and regulations that put caps on the interest rates that MFIs, rural credit operators and NGO credit programmes can charge their borrowers. It is crucial to ensure that borrowers, and not just lending institutions, can profit from loans.

Sim Socheata
Phnom Penh

Send letters to: [email protected] or PO Box 146, Phnom Penh, Cambodia. The Post reserves the right to edit letters to a shorter length.
The views expressed above are solely the author's and do not reflect any positions taken by The Phnom Penh Post.

MOST VIEWED

  • Proof giants walked among us humans?

    For years a debate has waged about whether certain bas relief carvings at the 12th-century To Prohm Temple, one of the most popular attractions at the Angkor Wat Temple Complex in Siem Reap province, depicted dinosaurs or some rather less exotic and more contemporary animal,

  • Japan bank buys major stake in ANZ Royal Bank

    Japan's largest bank acquired more than half of ANZ’s shares in Cambodia on Thursday, according to a statement from Kith Meng’s Royal Group. Japan's JTrust Bank, announced that they had acquired a 55% of stake in ANZ Royal Bank. According to a Royal Group

  • Long way to go before Cambodia gets a ‘smart city’

    Phnom Penh, Siem Reap and Battambang will struggle to attain smart city status without adopting far reaching master plans, according to officials tasked with implementing the program. The brainchild of the Association of Southeast Asian Nations (Asean), the smart city program seeks to link up

  • China-Cambodia tourism forum held

    The Cambodian tourism sector must be prepared to welcome a growing number of Chinese tourists, as they lead the globe in the number of outbound travellers and were responsible for the most visitors to the Kingdom last year, the country’s tourism minister said on