MFIs downplay debts
Two of the leading microfinance institutions (MFIs) in Cambodia said yesterday that they have identified a relatively small fraction of borrowers who were affected by flooding and would provide relief on their repayment schedules if necessary.
The comments come after both Prime Minister Hun Sen and members of the opposition Cambodia National Rescue Party called on MFIs to do more to help ease the financial burden of the indebted amid destruction wrought by flooding.
Speaking at the Council of Ministers on Friday, Hun Sen called for understanding from private and registered lenders, suggesting grace periods for repayment, cancelling late penalties and forgoing interest rates.
In addition to causing more than 100 deaths, the rising waters have damaged hundreds of thousands of crops, wrecked infrastructure and put farmers who took out loans to pay for basic commodities in debt.
MFIs, though, cautioned that the number of people struggling to repay loans is small.
Chea Phalarin, chief executive officer at the second-largest MFI, Amret, said yesterday that his firm had already reported to the central bank the number of clients affected by floods.
“We are considering the suggestion from the government, and we judge based on obvious situations,” Phalarin said. He added that operators need to avoid being cheated from false claims.
Sim Senacheert, general manager of the leading MFI, Prasac, identified 300 families out of nearly 180,000 borrowers that were so devastated by the floods that they may require a renegotiation of terms.
“It is not a new issue, and it is not a serious concern,” he said.
Neither were able to provide statistics on unofficial money lending, which is often the cause of skyrocketing debt due to high interest rates.
Loans at Cambodia’s 35 microfinance institutions reached close to $1.2 billion at the end of September, according to recent data from the Cambodia Microfinance Association. It is estimated that about 30 per cent of loans are for agricultural production.
In his remarks, Hun Sen stresses that his suggestions were not for all people in debt.
“I just call for [understanding] for people who suffered from floods or any who really use the loan to expand business. I don’t call for those who take the loan for gambling.”