Licadho Report Selective and Misleading, says CMA

• 8 August 2019
• Local News
• 2958 Views

The Cambodia Microfinance Association (CMA) on 07 August condemned the recent Licadho report regarding the predatory system of microfinance in Cambodia, arguing that the report relies on flawed methodology, does not represent the status of microfinance in Cambodia, and destroys the reputation of MFIs in the kingdom.

The condemnation comes in response to the report by Licadho and Sahmakum Teang Tnaut (STT) saying that the acceleration in microfinance debt in Cambodia – for which land titles are mostly used as collateral – can pose significant risks to millions of local debtors in the kingdom including land loss and many other systematic human rights abuses. (Read more)

In their press release, CMA noted that authors of the report have selected only 28 case studies out of approximately 2 million loans; and based their findings solely on negative outcomes from MFI borrowing. As a result, the report presents an inaccurate picture that does not reflect the true state of MFI lending that has to date benefited of thousands of Cambodians.

“The CMA takes very seriously any reports of unethical or predatory lending practices and we are working with our members to investigate the case studies presented in the report. But we are extremely concerned that report relies on such as a small sampling of MFI borrowers in Cambodia and also that none of our members, or the Association itself, was contacted by the report’s authors during the course of their work,” said CMA chairman Kea Borann.

The association also stated that their members always follow strict lending guidelines, which are far more stringent in tackling over-indebtedness than regulations in many other microfinance markets in the world.

Moreover, in response to accusations of alleged land loss in the Licadho report, CMA also claimed loans to individuals are mostly under US$1,000 which do not require collateral to secure the loan. This infers that chance of land loss to repay the loan is very low.

In addition, the press release by CMA also mentioned that MFIs have so far been contributing to the kingdom’s economy.

“Microfinance has contributed to a reduction in poverty levels from 47% of the population in 2007 to 13.5% of the population in 2014 according to World Bank Data…Accessing a loan increases the chance of a household to engage in a house enterprise by 4% relative to similar households who did not have a loan in 2016” said Mr Kea.

Director General of the National Bank of Cambodia Serey Chea also showed her disapproval of the report via her personal Facebook page.

“We condemn unethical practices by financial institutions in Cambodia and take seriously the allegations and will investigate and take necessary actions,…” she said in her post.

“…I have to admire the coordination between these major international media (Reuters, Bloomberg, Nikkei, Aljazeera) to publish a story intended to DAMAGE Cambodia’s financial sector image, on the same day, based on the same report by a small local NGO, with the same wordings (academics would call it plagiarism), without fact checking…It seems that a survey done on 28 individuals (carefully selected) is representative of the whole industry of 5 million+ borrowers…,” she added.

• Analysis