Five Priority Areas For Action On Microfinance In Cambodia – NBC-UN Multi-Stakeholder Dialogue
The National Bank of Cambodia (NBC) and the United Nations (UN) convened a multi-stakeholder dialogue on microfinance on July 12, 2024. The consultation addressed the rapid growth of the microfinance sector in Cambodia and potential issues such as indebtedness faced by borrowers.
In recent years, mutiple reports have highlighted the issue of microloan indebtedness in Cambodia's rural communities, leading to coerced land sales, child labour, limited food consumption for families, and even suicides.
According to a joint statement released by the NBC and the UN, the high-level multi-stakeholder dialogue charted actions for the short, medium, and long term in five priority areas: regulations and supervision, borrower support, technical enhancement, informal lending and local authorities, and agricultural risk insurance.
What Are The Five Priority Areas For Actions On Microfinance In Cambodia?
- Regulation and Supervision: Mandate the implementation of the code of conduct and lending guidelines; enhance cooperation and coordination among different regulatory bodies; and ensure an effective self-regulation mechanism.
- Borrower Support: Strengthen complaint mechanisms; create a working group to establish an independent debt counselling and mediation mechanism; and enhance financial literacy for borrowers.
- Technical Enhancement: Collect and share consolidated data; develop regulations on loan restructuring and/or refinancing; and standardise the definition of microloans.
- Focus on Informal Lending and Local Authorities: Enforce regulations on informal lending; and enforce the roles of local authorities.
- Insurance: Pilot an insurance scheme for agricultural risks due to climate change under modern agricultural cooperatives; and establish a working group to support the creation of modern agricultural cooperatives for indigenous people communities.
Ongoing Multi-Stakeholder Consultation Process Between NBC And UN
The July 12 dialogue was part of a multi-stakeholder consultation process on microfinance, between the NBC and the UN, that began in November 2023 due to increasing concerns over the rapid growth of Cambodia’s microfinance sector and its potential linkages to other issues.
The main aim of the consultation process is to facilitate constructive stakeholder engagement, develop a shared understanding of the issues, and identify specific actions and commitments to support stakeholders in navigating challenges and seizing opportunities to strengthen the banking and financial sector.
Stakeholders representing 100 different groups and institutions – including government, regulatory bodies, banking and financial institutions, investors, civil society and non-government organisations, think tanks, development partners, and UN agencies – have been consulted thus far at a series of individual stakeholder group dialogues and multi-stakeholder technical meetings.
The joint statement from the NBC and the UN added that the representatives who attended the July 12 dialogue have affirmed their commitment to fostering a fairer and more transparent banking and financial sector that serves the needs of the Cambodian people by promoting responsible and inclusive banking and financial practices.
The consultation remains ongoing, with the next scheduled multi-stakeholder meeting to take place in January 2025 to evaluate and monitor the progress of actions taken by all relevant stakeholders.