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Home ASIA Cambodia

Cambodia Central Bank reiterates need for soft approach to borrowers

May 27, 2020
in Business, Cambodia, National
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Cambodia Central Bank reiterates need for soft approach to borrowers
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Cambodia Central Bank has reiterated to banking and finance institutions the need to continue solving consumers’ issues with a soft approach aligned with the bank regulator’s regulations on loan restructuring for all sectors.

During a workshop called Consumer Protection of Banking and Finances on the Outbreak of COVID-1, held in Battambang and Banteay Meanchey this week, the National Bank of Cambodia’s governor Chea Chanto said that the Central Banking, as the regulator, has been strengthening its work on the supervision and regulation of the banking and financial sectors to provide better services to all people in any place across the country in order to help them to create or expand a business.

He said that financial literacy is also important because it can help the people to know how to use the loan and their obligation to pay it back in a timely manner in order to boost their living standards. “The local authorities play a crucial role in educating, guiding, facilitating and giving information to the people about loans,” said Chanto.

NBC’s Director General of Banking Supervision Rath Sovannorak said that in order to protect the microfinance (MFI) customers, the local authorities must take legal action against unregistered organisations and private loan providers who create fake news to present an incorrect understanding of situations.

They must promote and educate people to be aware of the source of loans, the use of loans and payment obligations. Plus, they should not issue a certification letter to people to allow them to get a loan from MFIs and banks if they have many loans in hand.

Sovannorak added that the banking and MFIs must set up a clear policy and issue strict measures for credit officers who must respect internal regulations and act professionally. They must provide their financial services fairly and transparently and strengthen the consumer protection principle as well as to promote more awareness to consumers on their payment obligations.

“For the consumers, they must know their loan payment obligations. When they borrow money from the bank or MFI, they must pay it back. They should learn how to compare interest rates, terms and conditions of the loan before agreeing to it with an MFI or bank,” Sovannorak said.

“They [customers] should avoid borrowing money from one financial institution to pay off another financial institution because it can create over-indebtedness and they should not borrow money from private loan providers or unregistered MFIs or financial institutions,” he added.

Kea Borann, chairman of the Cambodia Microfinance Association (CMA), said that during the tough situation of the COVID-19 pandemic, the association has been working actively with relevant stakeholders and the NBC to help affected customers.

He added that as of May 24, about 175,364 customers had applied to restructure their loans. Of those, 152,808 customers (90 percent) have received approval for loan restructuring to a total value of $656 million.

“The workshop on Consumer Protection of Banking and Finances on the Outbreak of COVID-19 came at the right time to raise awareness of customers and it is important for microfinance firms to inform people of new developments in the microfinance sector in Cambodia because this sector plays an important role in boosting and diversifying the economy in the Kingdom,” Borann added.

As of April, the total outstanding loans with MFIs had reached $7 billion, with the total number of borrowers amounting to 2.1 million people and more than 2.8 million depositing a total of $3.7 billion among MFIs.

This article was first published in Khmer Times. All contents and images are copyright to their respective owners and sources.

Tags: Banteay MeancheyBattambangCambodiaCambodia Central Bank
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