PHNOM PENH —
Cambodia’s opposition leader Sam Rainsy has called on financial institutions in Cambodia to lower interest rates in accordance with global trends and as a way to ease the debt burden on poor families.
Writing on Facebook from self-imposed exile in France, Rainsy said banks and micro-finance institutions should pass on profits to customers.
Interest rates have remained between 10 and 20 percent in Cambodia, he said, far higher than the global average, while banks are making high profits because financing costs have been declining due to borrowing from overseas.
“In conclusion, those banks and financial institutions must now reduce their interest rates in order to pass on to their customers the worldwide decline in interest rates. Such a measure would only reflect fairness in business and would be a big relief for many poor people who are heavily indebted,” he wrote.
Rainsy told VOA Khmer via email on Sunday that world interest rates had declined by up to 5 percent on average over the past few years. If Cambodia was to be in-line with the global norm, he added, it would adjust its interest rates to between 7 and 17 percent.
In Channy, CEO of Acleda Bank, said the funds borrowed from overseas are commercial loads with interest rates of at least 7.75 percent as Cambodia is considered an at-risk financial destination. Another factor adding to the high interest rates was the exchange rate into the local currency, Riel.
“The funds we borrow are in foreign currency. So when we use them as loans in our Khmer Riel, we need to exchange from foreign currency to Khmer currency. So fluctuation of exchange rates is another risk,” he said.
“Add that to the operation costs, it causes our interest rate not able to go as low as you just mentioned,” he added.
Channy added that interest rates on loans in Cambodia was now between 9.5 percent and 25 percent.
Chan Sophal, president of the Center for Policy Studies, said interest rates, especially for micro-loans, were far higher than in neighboring countries, adding that the government would need to encourage more competition and reduce risks if finance institutions were to lower rates.
“Talking about free market, the state can push for more competition, preventing them from setting the same high interest rate, that’s number one. Number two, the state has to reduce visible risks such as it being OK if the people do not pay back [the loans]” he said.
Chea Serey, director-general of the National Bank of Cambodia, could not be reached for comment.
According to Sophal, interest on micro-finance loans can reach as high as 30 percent.
In the first quarter of this year, loans from micro-finance institutions was reported to amounted to $3.1 billion, up by about 8.4 percent from $2.9 billion in the same period last year.