A day after the National Bank implemented a new 18 percent cap on microfinance loans, purportedly on the orders of Prime Minister Hun Sen, former opposition leader Sam Rainsy took to social media to post what appears to be a 2015 email exchange in which he asked the premier for precisely that.
In the posted email, Rainsy, who is living in exile in France, highlights the “financial slavery” faced by Cambodians who have taken high interest rates, suggesting a cap on interest rates charged on loans.
The Facebook post followed Monday’s issuing of a National Bank of Cambodia prakas capping microloan interest rates at 18 percent for new and refinanced loans effective April 1, a move that financial experts have questioned as potentially detrimental to people’s access to finance.
“But he [Hun Sen] didn’t pay much attention to my suggestion until the announcement today of such a measure,” Rainsy posted on March 14. In the email, he recommends an interest rate ceiling of 18 percent, citing similar 12 and 15 percent rate caps in Vietnam and Thailand, respectively.
An alleged email from Hun Sen sent the same day, also posted by Rainsy, has the premier saying that the proposal had been sent to relevant ministers to evaluate a rate ceiling. Neither officials at the National Bank and Ministry of Economy and Finance, nor Eang Sophallet, a personal adviser to Hun Sen, could be reached yesterday to corroborate Rainsy’s claims.
Rainsy stood by his recommendation of an 18 percent cap yesterday, saying he was happy the government had followed his advice, and that it was indicative that dialogue was needed to address critical issues.
“That’s why, over the last few years, as the opposition leader, I have written to Prime Minister Hun Sen on many occasions to show that the opposition was (and still is) willing to engage with the government in a constructive dialogue,” he said via email.
Asked to address criticisms that the new diktat could curb access to capital for the poor, Rainsy would only say: “No, I think things can work differently.”
But Kem Monovithya, deputy director-general of public affairs for the CNRP, yesterday said the 18 percent rate cap was not the right solution, but suggested that was less because it would curb access to financing, and more because it would increase “unhealthy borrowing” because of lowered rates.
Pointing to a new study reported on by The Post on Wednesday, Monovithya said borrowers were taking high interest loans for nonproductive activities and an interest drop would only perpetuate that behaviour further. “If one takes a microfinance loan to buy a motorbike, that is unhealthy; he won’t be able to pay it back even if with lower interest rate, as the loan doesn’t create or increase his income,” she said, via email.
Monovithya said that well-regulated MFIs and an increase in the financial literacy of borrowers will encourage more “responsible loans”, going on to call for limiting collateral-based loans for those with no income, and the creation of consumer protection mechanisms and personal bankruptcy laws.
Rainsy – who has to his name a number of convictions, widely considered political – resigned from the CNRP last month to avoid the new Law on Political Parties from being used against the opposition.
One of the court cases facing him – a defamation suit brought by the premier for Rainsy’s suggestion that political commentator Kem Ley’s death was a state-sponsored assassination – will be heard today, with Rainsy’s lawyer Sam Sokong saying he expected his client to be quickly convicted, as have others who faced similar accusations.
ADDITIONAL REPORTING BY NIEM CHHENG AND ANANTH BALIGA