Authorities crack down on illegal lending practices

Authorities crack down on illegal lending practices

The move comes amid a growing number of unlicensed operators engaged in activities such as unofficial money lending, mortgages, direct lending and online lending.

The Ministry of Interior, the National Bank of Cambodia (NBC), and the Non-Banking Financial Services Authority (NBFSA) have issued a strong warning against individuals and entities operating illegal lending schemes that continue to undermine the livelihoods of citizens and destabilise Cambodia’s economic and social environment.

In a joint statement on Friday, the three institutions revealed that they have observed a growing number of unlicensed operators engaged in activities such as unofficial money lending, mortgages, direct lending and online lending. These practices have been carried out without prior permission from the competent authorities and in clear violation of existing laws.

Authorities reported that such operators are not only running businesses without proper licensing but are also resorting to intimidation, threats and the imposition of unfair contracts. In many cases, lenders have demanded that borrowers surrender personal identification documents, including national ID cards, residence books, equity (poor) cards, and National Social Security Fund (NSSF) membership cards as collateral. Officials underscored that these actions are illegal and fundamentally exploitative.

“These activities have had a serious impact on the livelihoods of our citizens and on public security, order and the investment climate,” the statement read. “They undermine socio-economic stability and threaten the rule of law.”

Under the Law on Banking and Financial Institutions, all types of credit provision to the public—including leasing, loan services and contract-based lending—are considered banking activities. Article 2 of the law stipulates that such services can only be provided by institutions licensed by the NBC.

Article 55 of the law is explicit in its penalties: “Any person, whether an individual or entity, who conducts banking operations as a regular profession for the public without permission shall be punished with imprisonment from one to five years and a fine ranging from five million riels to 250 million riels, or both.” Closure of the unauthorised establishment may also follow.

Similarly, the regulation of pawnshops and mortgage businesses falls under the jurisdiction of the Real Estate and Mortgage Business Regulator (REMR) of the NBFSA. According to Article 33 of the Prakas on Licensing Rules and Procedures, operating without a valid licence, or continuing operations with an expired licence of more than six months, can result in fines of between 10 million and 20 million riels. The regulation further provides that repeated violations may lead to doubled fines.

Even smaller-scale violations, such as operating pawnshops without permits or using expired business permits, are subject to fines of between five million and 10 million riels, with immediate cessation of operations mandated.

The authorities stressed that accepting identity documents as collateral is strictly prohibited. “National ID cards, residence books, equity cards and NSSF membership cards have no commercial value and cannot legally be used as loan collateral,” the statement emphasised. This prohibition is reinforced by Article 129 of the Law on Civil Status, Civil Status Statistics and Identification, which defines the Khmer Nationality Identity Card as an official confirmation of an individual’s citizenship. The article explicitly states that the card cannot be transferred or used to confer rights on another party.

The Ministry of Interior, the NBC, and the NBFSA have called on all unlicensed lenders to immediately cease operations. Any individuals or entities that continue to defy the prohibition will face administrative and criminal sanctions under Cambodian law.

Officials further appealed to citizens to remain vigilant, advising them to avoid borrowing from unlicensed operators and instead seek services from registered financial institutions. By doing so, they said, citizens can protect themselves from predatory practices and contribute to strengthening Cambodia’s financial sector and investment environment.

The crackdown comes as part of broader government efforts to safeguard the public, reinforce the credibility of the Kingdom’s financial system, and support socio-economic development.

khmertimeskh