Cambodia Investment Review
In a collaborative effort to address growing concerns in Cambodia’s microfinance sector, the National Bank of Cambodia (NBC) and the United Nations in Cambodia initiated a multi-stakeholder consultation process in November 2023. This initiative was launched in response to the rapid expansion of the microfinance sector and its potential links to issues such as indebtedness.
The consultation process aimed to facilitate constructive engagement among various stakeholders, foster a shared understanding of the challenges, and identify actionable commitments to strengthen Cambodia’s banking and financial sector. The initiative involved extensive dialogue and technical meetings with a diverse group of participants, including representatives from the government, regulatory bodies, financial institutions, investors, civil society organizations, and international partners.
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On July 12, 2024, a significant high-level multi-stakeholder dialogue was convened to consider the findings from these consultations and to chart a course for future actions. The stakeholders reached a consensus on five key priority areas to address both immediate and long-term challenges in the microfinance sector:
- Regulation and Supervision: The need to mandate the implementation of a code of conduct and lending guidelines was emphasized. Enhancing cooperation among various regulatory bodies to ensure effective self-regulation mechanisms was also highlighted.
- Borrower Support: Strengthening complaint mechanisms and creating a working group dedicated to establishing an independent debt counseling and mediation mechanism were identified as critical. Enhancing financial literacy for borrowers was also a focal point.
- Technical Enhancement: Participants stressed the importance of consolidated data collection and sharing, regulation on loan restructuring and refinancing, and standardizing the definition of microloans.
- Focus on Informal Lending and Local Authorities: The dialogue underscored the need to enforce regulations on informal lending and reinforce the roles of local authorities in overseeing these practices.
- Insurance: Stakeholders proposed a pilot insurance scheme for agricultural risks due to climate change under modern agricultural cooperatives. Additionally, establishing a working group to support the creation of cooperatives for indigenous people communities was recommended.
The representatives who attended the dialogue affirmed their commitment to ensuring that Cambodia’s banking and financial ecosystem empowers individuals, particularly the most vulnerable groups. They highlighted the importance of supporting the sustainable development agenda and contributing to the country’s overall economic stability.
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The consultation process remains ongoing, with the next multi-stakeholder meeting scheduled for January 2025 to evaluate and monitor the progress of the agreed actions by all relevant stakeholders.
NBC expressed its commitment to creating a more robust regulatory framework that protects borrowers and enhances the integrity of the microfinance sector. The collaborative efforts of all stakeholders are considered vital for achieving these goals.
The NBC and UN in Cambodia remain dedicated to their mission of strengthening the financial sector, ensuring fair practices, and supporting the economic growth of Cambodia. The full list of priority actions is available in the enclosed annex.
