The Second NBC-UN High-Level Multi-Stakeholder Convening on Microfinance in Cambodia was held on January 23. UN Cambodia\Sreysros Keo
The National Bank of Cambodia (NBC) and the UN in Cambodia have shared the progress of reforms in Cambodia's banking and microfinance sector. The two organisations launched an initiative in November 2023 to address concerns about over-indebtedness and ensure responsible and inclusive financial practices.
In a January 28 joint statement, the NBC-UN high-level multi-stakeholder dialogue announced that it has reviewed 22 of the priority actions which were adopted during the inaugural high-level multi-stakeholder meeting in July 2024.
Four were assessed as completed, 15 as in progress and three have just been initiated.
The statement explained that the actions were designed to address concerns regarding the rapid expansion of the country’s microfinance sector and its potential connections to issues such as over-indebtedness. The dialogue aimed to facilitate constructive engagement among stakeholders and build a shared understanding of the issues, as well as to identify actionable steps.
A comprehensive series of consultations was conducted with representatives from over 100 groups and institutions across government, regulatory bodies, banking and financial institutions and associations, investors, civil society and non-government organisations, think tanks, development partners, UN agencies and international financial institutions.
The statement reported that advancements in responsible lending have been made.
These included the prohibition of the use of Indigenous Communal Land Titles (ICLTs) as collateral and the prevention of the forced sale of such titles. The Consumer Protection Harmonisation Assessment Tool is also now in use, with 30 financial institutions set to undergo independent evaluations.
In addition, banking and financial institutions are revising their key performance indicators to align with responsible lending guidelines and the principle of “Do No Harm”.
They also prepared a joint statement to enforce regulations prohibiting the misuse of personal identification documents as collateral in lending practices.
All stakeholders have expanded financial literacy and customer empowerment programmes to better inform borrowers, particularly those facing debt stress.
Loan restructuring measures and the prioritisation of borrowers experiencing financial difficulties, including vulnerable and indigenous groups, are also a focus.
A pilot climate risk and crop insurance programme under a Modern Agricultural Cooperative has been launched, but more effort is needed to identify the optimal insurance model for scaling up this initiative, including coordination and funding support in providing market access and credit opportunities for indigenous communities with ICLTs.
“Stakeholders are committed to fostering a fair and transparent banking and financial ecosystem through responsible and inclusive practices that empower individuals, particularly the most vulnerable, while contributing to Cambodia’s sustainable development and economic stability,” said the joint statement.
It added that the progress on the priority actions will be continuously monitored, with the next high-level multi-stakeholder dialogue scheduled for August.
In a recent joint statement, several local and international civil society organisations claimed that the Kingdom’s microloan sector had “ballooned” in recent years, with average loan sizes rising to over $5,000, the highest in the world. Such high level coerced debt-driven land sales across the country, the warned.
The claim was refuted by The Cambodia Microfinance Association (CMA).
