NGOs Stand by Reporting on Abuses in Cambodia’s Loan Sector After Lenders Demand ‘Corrections’

Four nongovernmental organizations (NGOs) said Thursday they stood by their reporting after associations representing Cambodia’s financial sector demanded that they “correct” papers calling for debt relief for jobless workers, who are struggling to repay debts amidst the coronavirus pandemic.

Licadho, the Center for Alliance of Labor and Human Rights (CENTRAL), and the Cambodian Alliance of Trade Unions (CATU) issued a joint briefing paper last month titled “Worked to Debt,” which said that tens of thousands of garment workers will struggle to repay microfinance debts during work stoppages and factory suspensions caused by the outbreak.

The groups said the situation is “creating a mounting human rights crisis” and warned that without relief from debts owed to microfinance institutions (MFIs), many of the workers will resort to selling their land or homes, eating less food, or taking out even more loans to repay what they borrowed.

The paper elicited a statement from Cambodia’s ACLEDA Bank, which accused the groups of trying to “confuse the people who are using banking services and provoking social chaos to exploit donors.” It said the groups were trying to take advantage of companies in the private sector that are working with the government to promote development.

On Wednesday, the Association of Banks in Cambodia (ABC) and the Cambodia Microfinance Association (CMA) published an open letter demanding that the three NGOs and rights group Sahmakum Teang Tnaut (STT), “review and make other necessary corrections” to the report.

They also wanted changes to a May 5 report by Licadho on MFIs and cross-border migration, and an Aug. 7, 2019 report by Licadho and STT on MFIs and land loss.

“[We] contend that your published reports are lacking scientific evidence, transparency, and especially representative significance,” the letter said.

“Also, they created a situation … [that is] damaging to the reputation of the financial sector in Cambodia, which is the backbone of the national economy.”

The associations said that all approved loans are in compliance with national law and international standards, and that ensuring the financial success of their clients is in their best interests.

On Thursday, the four NGOs responded to the open letter in a joint statement, rejecting the call to change any of the three reports on human rights abuses and the microfinance and microloan sector.

“The information and individual stories in these reports remains accurate,” the groups said, adding that they would protect the privacy of people who had shared their experiences with them.

“One of our jobs as civil society groups is to amplify the voices of people who are suffering human rights abuses and tell their stories to a wider audience, in the hopes of making positive change in society to prevent these abuses from occurring,” the statement said.

“We will continue to share those voices, even when it means highlighting human rights issues linked to the microfinance and microloan sector in Cambodia.”

Last month’s briefing paper was based on interviews with 162 workers—most of them women—from three factories in Phnom Penh and Kampong Chhnang, and found that of those surveyed, only four were debt-free.

Nearly every worker said they would be unable to repay their debt if their work was suspended because of the outbreak and that their lives were worse off now than before they took out their loan.

According to the groups, two-thirds of those surveyed had taken out at least one microloan from a bank or MFI, mostly to pay off an earlier debt. Nearly three-quarters of those with microloans were eating less food in order to pay back what they owed, they said.

There are approximately 2.6 million microloan borrowers in Cambodia, who together held more than U.S. $10 billion in microloans at the end of 2019, the paper said. Cambodia’s average microloan size far surpasses that of the rest of the world at U.S. $3,804.

In June, Prime Minister Hun Sen threatened to allow banks and microfinance lenders to file complaints with the courts in order to confiscate the assets of borrowers if they refuse to pay their debts.

Sector recommendations

On Thursday, the four groups reiterated recommendations they had made to lenders to prevent rights abuses in the financial sector in their three reports, including an end to requiring land titles as collateral for all new microloans and loans targeting poor Cambodians.

They called on MFIs and banks to calculate and publish the number of land titles currently held as collateral and to use existing legal mechanisms to address default instead of pressuring clients to sell land in order to repay debts.

The groups also urged lenders to facilitate independent, sector-wide investigations into industry practices and provide relief and remediation to borrowers when wrongdoing is uncovered.

They called for the suspension of debt repayments and interest accrual for at least three months, prioritizing workers who have lost their jobs or had their jobs suspended, as well as borrowers from impoverished communities and households, who the group said are among the hardest-hit by the economic impact of the coronavirus.

Speaking to RFA’s Khmer Service, Am Sam Ath, deputy director of Licadho’s Human Rights Investigation Team, said the four groups held a meeting to discuss their joint response to Wednesday’s statement by lenders.

He said the reports were focused on human rights and written with the expectation that authorities could use them to resolve issues with the sector.

“Our report did not attempt to incite anyone or benefit any political party,” he said. “The report is unbiased and impartial, and it is available to everyone.”

CATU president Yang Sophoan told RFA that last month’s report “reflects the truth of what workers are facing,” noting that more than 100 workers had made similar statements about their hardships caused by debt.

She said several people claimed they were making just enough to pay their debts, while others were forced to sell their land to do so.

STT director Soeung Saran also stood by his organization’s report, telling RFA it was based entirely on evidence provided through community interviews.

 

Radio Free Asia Copyright © 1998-2016, RFA. Used with the permission of Radio Free Asia, 2025 M St. NW, Suite 300, Washington DC 20036