In many public spaces – such as stapled or taped to utility poles, trees or fences – one can sometimes see flyers advertising unofficial loan services that promise quick cash to desperate customers, or even high interest returns on deposits.

These loan services are also promoted on social media platforms like TikTok, Facebook, Telegram and through flyers which are often attached to parked motorcycles, usually with no clear details of the business’ location.

Generally, these loans require borrowers to submit documents such as identification cards, birth certificates, family books or other valuable documents.

However, the National Bank of Cambodia (NBC), the Association of Banks in Cambodia (ABC), and the Cambodian Microfinance Association (CMA) have warned that these seemingly attractive loans pose high risks for customers, as many of them are merely scams.

During an October 8 press conference, Chea Serey, NBC governor, explained that people who take unofficial loans may face threats or even violence from their creditors if they are unable to repay.

As for those who deposit money with the hope of receiving high interest returns, she warned that they are likely to be scammed and fall into debt, as many of them borrow money from banks to invest in these unofficial loan schemes.

“Most of the people who face such problems are those who took loans from microfinance institutions or banks and invested them in unofficial loans, sometimes to invest in offers which promise that a $300 deposit will result in a $1,800 return within 24 hours,” Serey explained.

“When their money disappears, they have nothing to repay the loan. When the bank or microfinance institutions come to collect from them, problems occur, and they often accuse microfinance of confiscating their property,” she added.

The world continues to suffer from the impacts of ongoing conflicts and the lingering effects of the Covid-19 pandemic, and Cambodia is no exception. This drives many people to turn to finance institutions for loans to support their businesses. But when their situation is unstable, some registered financial institutions may reject their loan request. This situation may push some citizens further into the traps of unofficial loans, according to Serey.

“I urge our people to be very cautious, especially at this time, as there are many opportunists. When people are unable to borrow from official institutions, we fear they will turn to unregistered outlets. But please understand that if an institution refuses a loan, it means they have already assessed that the borrower does not have the capacity to repay. Therefore, it is better not to borrow,” she urged.

The NBC, ABC, CMA, as well as representatives of LOLC, ABA, ACLEDA and Maybank who were present at the press conference, appealed to citizens not to engage in unofficial loans, as authorities may find it difficult to assist in the event of problems. This is because scammers often have no clear address and there are no legal mechanisms available to resolve such disputes.