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Micro-Finance Groups Pledge to Tighten Rules to Maintain Sector’s Stability

Screenshot of Cambodia Microfinance Association homepage.
Screenshot of Cambodia Microfinance Association homepage.

Some $3.5 billion was thought to have been lent to about 2 million families by Micro Finance Institutions in Cambodia by 2016.

Cambodia’s leading microfinance group has said it is working to better enforce its code of conduct following years of negative press regarding unscrupulous loan agencies.

The Cambodia Microfinance Association (CMA), which represents 87 minor credit institutions, said in a statement last week that it would better implement its code of conduct to help maintain stability in the sector.

Yun Sovanna, secretary general of the CMA, said the rules if implemented should protect lenders and ensure credit officers meet their responsibilities.

“We want to keep integrity, professionalism and accountability of the MFI sector,” he said.

According to the statement, MFIs should not accept national identity cards, family record books or residential records as collateral in providing loans. They should also make it clear to potential clients that they are not government institutions and operate as for-profit enterprises.

“MFIs are financial institutions, not political entities. Staff of MFIs cannot use the logos of national institutions or any part of their basic operations be taking part in political activities or campaigns,” the notice states.

Sovanna said that MFIs in the past had adopted logos similar to government institutions in order to appear more legitimate to clients, but in future such activity would lead to staff losing their jobs.

“The severe punishment for the staff who use logos for political exploitation or to exploit the services could be the termination of their employment contracts,” he said.

Chea Serey, deputy director of the National Bank of Cambodia, could not be reached.

Ngeth Chou of consultancy group Emerging Market Consultant said that CMA was attempting to clean up its image, but added that some MFIs would probably continue to ignore the rules.

“Frankly speaking, it seems that it’s an attempt to clean up their image to make people think that the CMA members will not [break the rules],” he said.

Some $3.5 billion was thought to have been lent to about 2 million families by MFIs in Cambodia by 2016.