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Three human rights groups file suit against microfinancer

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Logos of the three rights groups that have filed a lawsuit in the Netherlands against Oikocredit. LICADHO

Three human rights groups file suit against microfinancer

Three human rights groups – LICADHO, Equitable Cambodia (EC) and Germany-based FIAN – have filed a joint complaint with the government of the Netherlands against Oikocredit, which invested in microfinance in Cambodia.

In the complaint, the three organisations asked the Dutch government to take action against Oikocredit over its negative impact on microfinance in Cambodia since 2017, according to a December 12 joint statement.

The statement read that Oikocredit made a huge investment in microfinance in Cambodia from 2017 to 2022. A lot of evidence showed its involvement in heavy debt creation and a negative impact on society, based on reports released by local NGOs, journalists, international NGOs and Oikocredit itself.

The statement said that despite this evidence, the company had increased its investment in microfinance in Cambodia. The investment had increased to €50 million ($53.2 million) in 2017 to over €67 million as of December 2022. The investment made Cambodia the company’s second-largest investment.

It added that the investment had contributed to creating a human rights crisis because of the problem of debt in Cambodia. The crisis had caused forced land sales, food insecurity and cost people their livelihoods.

EC executive director Eang Vuthy said the three organisations had filed the complaint because they believe that Oikocredit had failed to carry out due diligence on its investments in the Kingdom.

He added that having filed the complaint, he hopes that Oikocredit will carry out an assessment of the situation and the three microfinance institutions – PRASAC, LOLC Cambodia and Amret – that it had invested in.

“If Oikocredit continues to invest in these three microfinance institutions without closer inspection, they are directly contributing to the human rights issues and other problems related to the financial sector in Cambodia,” he continued.

Sok Voeurn, the CEO of LOLC, said he had just been made aware of the complaint. He was yet to receive detailed information about the complaint, so he could not comment on the exact reasons for the complaint.

“Claims that investment in microfinance plugs people into a crisis of debt are untrue. The Banking Association of Cambodia [ABC] and the Cambodia Microfinance Association [CMA] have laid out very clear principles and a strict code of conduct for those who provide loans,” he said.

He added that there are many mechanisms in place to respond to complaints from clients, and that unscrupulous loan providers would be prosecuted if wrongdoing was discovered.

CMA spokesman Kaing Tongngy said it appeared that the statement was intended to damage the image of the whole microfinance sector. The three organisations had based their complaint on reports written by those with no real understanding of the microfinance sector in Cambodia.

He said that some of the reports it referred to were from untrustworthy sources that were the opposite of the CMA’s own findings, and also independent reports supported by the German government.

“Attacks on the microfinance sector will not help the Cambodian people at all. In contrast, it may increase pressure on investors. Perhaps the current investors, who are focused on people’s welfare, will be replaced by those who are driven by profit. This would almost certainly lead to an increase in interest rates,” he added.

He acknowledged that although the microfinance sector was not perfect, it had made a significant contribution to the stimulation of growth of the nation’s economy and a reduction of poverty.

Tongngy said there are many measures in place to protect consumers, ranging from loan interest contract standards, training of heads of branches, training of loan officers, a code of conduct, loan provision principles, customer complaint mechanisms and financial education programmes.

A representative for Oikocredit could not be reached for comment on December 13.


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