NBC chief warns against borrowing money from informal lenders
NBC chief warns against borrowing money from informal lenders
Chea Serey, Governor of the National Bank of Cambodia (NBC), Saturday warned citizens against borrowing money from informal lenders who offer easy loans with oppressive conditions.
However, if a loan is necessary, Serey recommended borrowing money from an institution licensed by NBC.
The NBC Governor’s appeal followed two days after Deputy Prime Minister and Minister of Interior Sar Sokha, who urged citizens not to repay money borrowed from illegal online lending groups, as these groups also engage in other illegal activities.
Writing on her social media post, on February 15, Serey reminded the public that citizens should avoid borrowing money unless absolutely necessary.
She urged them to seek loans from microfinance institutions licensed by NBC, saying borrowing from a legal institution ensures a safer and more transparent resolution.
“Unlike illegal lenders, who may seem convenient but impose harsh conditions, use violence, and remain anonymous, licensed institutions operate within the law,” she added.
Serey further stressed the importance of responsible financial behaviour, urging both individuals and financial institutions to act responsibly. She noted that banking and financial institutions should provide loans with due consideration for their customers’ well-being, as “when customers prosper, the institution prospers”.
She also expressed gratitude to local authorities for their continued efforts in addressing unregulated informal lenders, who pose risks to both individuals and society.
During the closing ceremony of the 2024 work review conference on Thursday, Ministry of Interior outlined its ongoing initiatives and reviewed the results of the “Safe Villages, Communes-Sangkats” movement competition. Sokha reiterated the call for citizens to refuse repayment to illegal online lenders, highlighting their unlawful practices.
“Most of these illegal online lending groups are operated by Chinese entities,” he said.
According to him, many citizens have fallen victim to unlicensed lenders. When borrowers fail to repay, these groups resort to threats, public shaming, and harassment.
Sokha urged victims to report such threats to the authorities, who are actively investigating and taking legal action against these groups. He also instructed law enforcement to continue cracking down on illegal online loan providers.
Additionally, the Deputy Prime Minister called on the National Police to intensify efforts against illegal online gambling operations, particularly those sending messages to lure people into creating gambling accounts. He even mentioned that he personally receives such messages daily.
Dith Nita, Chairwoman of Cambodia Microfinance Association (CMA), said that formal loans are loans provided by banking and financial institutions registered with NBC to offer legal financial services and these loans have reasonable interest rates, low risk, and customer protection mechanisms in place.
In contrast, informal loans are provided by unregistered (illegal) institutions or individuals outside the formal financial system, including online lenders, she said, adding, informal loans often come with high risks, excessively high interest rates, and lack any customer protection mechanisms.
“I would also like to inform you that, within the legal framework, borrowers are protected by an interest rate cap of no more than 18 percent per annum for both banking and financial institution loans.
“In practice, customers of banking and financial institutions benefit from a high level of protection, as NBC, in its role as regulator, has established and continues to implement a rigorous monitoring and supervision mechanism.
“This ensures that banking and financial institutions not only comply with the interest rate ceiling (18 percent per year) but also conduct debt collection in accordance with the legal framework, safeguarding the rights of debtors,” Nita said.
These protection mechanisms are either nonexistent or poorly enforced in the case of informal loans, Nita said. “As a result, we have repeatedly observed that users of informal loans often face and suffer from illegal actions by lenders, including threats, violence, property confiscation, and orders that violate legal procedures and the fundamental rights of borrowers. In some cases, such practices have led to serious family problems” she said.
