The global not-for-profit financial inclusion organization Social Performance Task Force (SPTF) and Cambodia Microfinance Association (CMA) have entered into a first-of-its-kind partnership to assist microfinance lenders to adhere to strict client protection standards.
The agreement was signed at the Hyatt Regency in Phnom Penh and will build on the already implemented Cambodia Consumer Protection Framework collaboration between SPTF and the CMA.
The framework includes a financial sector code of conduct, client protection training certifications, external assessments/audits to check and demonstrate practices, a national responsible, inclusive finance label, consumer protection and financial literacy, and coordination on relevant policies/regulations.
The two organizations have agreed to focus on helping financial institutions in Cambodia learn about the SPTF’s Client Protection Pathway and the Universal Standards for Social & Environmental Performance Management.
First of its kind partnership
Speaking at the signing ceremony SPTF Director of Responsible Inclusive Finance Facility for Southeast Asia (RIFF-SEA) Nitin Madan commented the partnership was a first of its kind and would help chart a roadmap for responsible growth, financial stability, and customer protection in Cambodia’s microfinance and broader financial sector.”
“The CMA and its members can also apply for co-financing for implementing and strengthening capacity on responsible, inclusive finance practices of financial service providers in Southeast Asia,” he added.
Cambodia’s microfinance sector has been under increased scrutiny after allegations from civil society organizations of overindebtedness with lenders not following best international practices.
In response, Cambodia’s finance industry launched the ‘Banking and Financial Institutions Code of Conduct’ with plans to award institutions with ethical certifications aiming to increase the current level of trust and accountability of its members.
To read more about the new code of conduct and updated guidelines click here.
Sok Voeun, CMA chairman said this partnership aims to strengthen responsible inclusive practices from a risk management perspective to promote responsible growth, enhance financial stability and increase consumer protection.
“The initiative also comes in the context of the Smart Campaign phasing out, leading to the SPTF-CERISE partnership to play a more active role in that space. To this end, the partnership will also work toward the promotion and adoption of the SPTF-CERISE Client Protection Pathway and Certification on client protection,” he added.
To read more about the CMAs Chairman Sok Voeun click here.
Trust in Cambodia’s financial sector crucial
Kith Sovannarith, the First Deputy Director of Bank Supervision with the National Bank of Cambodia reflected that building trust in formal financial services remains crucial to increasing financial inclusion in Cambodia and ensuring the stability of the whole banking system while customer protection is the priority for all stakeholders.
Laura Foose, SPTF Executive Director added: “Since SPTF was founded in 2005, we have seen the power of collective action to drive effective self-governance. In many geographically and culturally diverse countries, the financial markets are healthier, and clients are protected when providers come together to agree to codes of conduct and performance standards to which they will hold themselves and each other accountable.”
“These efforts require both strong leadership and governmental support, so SPTF is grateful to the CMA and the National Bank of Cambodia for their commitment to our shared vision,” she said.
Increasing client protection is a priority under Cambodia’s National Financial Inclusion Strategy for long-term market sustainability for the associations more than 120 members with a combined loan portfolio of approximately $12 billion and 2.5 million clients as of March 2022.
SPTF’s work in Cambodia is made possible through the generous support of the Government of Luxembourg through the Ministry of Foreign and European Affairs which funds the RIFF-SEA.