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Hun Sen Asks MFIs to Defer Microloan Payments, Amid Factory Suspensions

FILE - Cambodia's Prime Minister Hun Sen gestures during a speech on the current state of a new virus from China in Phnom Penh, Cambodia, Thursday, Jan. 30, 2020.
FILE - Cambodia's Prime Minister Hun Sen gestures during a speech on the current state of a new virus from China in Phnom Penh, Cambodia, Thursday, Jan. 30, 2020.

Prime Minister Hun Sen on Monday asked microfinance institutions (MFIs) to defer payments or charge no interest for workers facing work suspensions at factories across the country, due the effects of COVID-19 on the economy.

Speaking at a road inauguration, Hun Sen asked the MFIs to find ways to defer payments for workers who were facing work suspensions, as factories temporarily shut down production on account of raw material shortages, especially from China.

The Ministry of Labor last week confirmed that around 33 factories, employing around 70,000 workers, had applied for work suspension from between 2 weeks to one month, affecting 18,000 of those workers.

“Delay repayments or take no interest,” he said, adding that 50 percent of workers at temporarily shut down factories were indebted. “And if possible, waiver the interest within the time [the work] is suspended.”

The prime minister also warned factory owners to refrain from using the work suspensions as a reason to lay off workers, also asking landlords to not increase rents or to give workers extra time to pay rent.

A report from local NGOs Licadho and STT released last year showed that there were around 2.4 million MFI borrowers with $5.4 billion in outstanding loans, often families having multiple microloans.

The report’s findings showed that increasing levels of debt were forcing Cambodians to sell their land, migrate for work and even put their children to work to pay back loans they couldn’t afford.

Phal Vandy, executive director of industry group Cambodian Microfinance Association, said the association was discussing the prime minister’s suggestion with its members, but was yet to reach a decision.

“From the association, we had further meetings with the banks and members of the micro finance institutions to discuss solutions to the current situation and to talk more about how to implement them,” he said.

Yang Sophorn, president of workers union Cambodian Alliance of Trade Unions, said the prime minister's appeal would not be effective unless it was a government direction and had legal backing. She added that finding a solution that would reverse the recent partial suspension of trade benefits to the EU could help workers.

“I met workers on March 8, and they said they want long-term jobs and they want the government to think about the measures it must take, in response to the European Union and EBA. If government keeps the EBA, they [workers] can keep their job,” she said.

VOA Khmer could not reach Heng Sour, spokesperson of the Ministry of Labor, for comment.

Prime Minister Hun Sen also announced that the Chinese government has prepared seven ships to supply raw materials to Cambodian factories, in order to prevent further factory suspensions and to get suspended factories back online.