Cambodian Journalists Alliance Association

Rights Groups and Dutch Investor Fail to Reach Agreement on Microfinance Abuses

A Phnom Penh office of Prasac Microfinance Institution Plc, which, as of February, had an active $10 million loan from Dutch social investor Oikocredit, photographed on Dec. 9, 2022. (CamboJA/Pring Samrang)
A Phnom Penh office of Prasac Microfinance Institution Plc, which, as of February, had an active $10 million loan from Dutch social investor Oikocredit, photographed on Dec. 9, 2022. (CamboJA/Pring Samrang)

After more than two years of talks, rights groups and Dutch investor Oikocredit failed to agree on a plan to tackle abuses in Cambodia’s microfinance sector.

A Jan 28. statement from three rights groups – Licadho, Equitable Cambodia and FIAN Germany – said the mediation process filed with the Dutch National Contact Point (NCP) in December 2022 to push Oikocredit for borrower relief ended last week without an agreement. Instead, the investor pledged to develop a framework for an independent mediation mechanism but gave no details on relief funds or a timeline, raising concerns for the group who said it fails to offer in immediate resolution.

In its statement, the NGOs argued Cambodian debtors deserve “tangible relief” and compensation from international investors such as Oikocredit, which has reaped millions in profits from an industry accused of exploitative lending – and which Oikocredit was allegedly aware of since 2017.

The groups also said other foreign investors share responsibility, including European state development banks that sold their majority stake in one of Cambodia’s largest microfinance institutions (MFIs) just weeks ago in a $550 million deal.

“It is deeply regrettable that at the end of this negotiation process, no points were agreed upon that would lead to a resolution […] This crisis has been escalating for years, and yet there remains no end in sight,” said the group. 

While Oikocredit insists its resolution plan meets international standards, including UN guidelines on business and human rights, the civil group negotiators said it lacks clarity on how it will protect debtors from being pressured to sell their land or prevent debt-driven suicides – abuses documented for years by local rights groups and international media.

Cambodia’s top MFIs – Prasac, Amret, and LOLC – are those most notably linked to abuses such as threats, coerced land sales (including Indigenous lands), and debt-driven hardships.

Oikocredit says its funding accounts for less than 1% of Cambodia’s microfinance sector, giving it limited influence. “However, we strongly believe microfinance can positively impact lives – but only if implemented responsibly and ethically,” it said.

The CEO of LOLC and spokespeople for Prasac and Amret Plc did not respond to email requests for comment.

Licadho Operation Director Am Sam Ath expressed disappointment over the failure to reach an agreement on harm reduction for Cambodian microborrowers and frustration that Oikocredit’s statement and pledge did not address the human rights abuses linked to its investments in the country’s microfinance sector.

The Dutch NCP did not immediately comment on the failed negotiations between NGOs and Oikocredit.

Kaing Tongngy, spokesperson for the Cambodia Microfinance Association (CMA), an organization that represents MFIs and has faced past criticism for weak sector regulation, said the association has tightened service standards to ensure accurate credit assessments. The CMA also launched training for bank executives and branch managers on customer protection and new regulations.

To promote responsible lending, CMA introduced a certification exam for loan officers, requiring them to retake it every three years. Over the past two years, more than 40,000 credit officers, out of 54,000 in the sector, have completed the course, according to Tongngy.

Though talks of reparations have been left off the table, the National Bank of Cambodia, in a joint statement with the UN, unveiled  “22 priority actions” after the mediation process ended. These include strengthening responsible lending through third-party assessments for 30 financial institutions, banning the use of indigenous land titles as collateral, and preventing forced sales of such titles. 

The initiatives also describe setting up consumer protection mechanisms, complaint resolution centers, and campaigns to boost financial literacy and consumer rights, especially for those struggling with debt.

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