Cambodia’s ACLEDA Bank accused three nongovernmental organizations (NGOs) of defamation on Thursday and urged the government to “take action” against them after they issued a report calling for debt relief for workers, who are struggling to repay their loans after losing jobs during the coronavirus pandemic.
Late last month, Licadho, the Center for Alliance of Labor and Human Rights (CENTRAL), and the Cambodian Alliance of Trade Unions (CATU) issued a joint briefing paper entitled “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 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 and that their lives were worse off now than they were before they took out their loan.
The groups said years of a lack of a living wage in Cambodia has forced workers to “take on larger and larger debts to survive,” noting that most of the loans are borrowed from MFIs and collateralized with land titles.
“The fact that so many workers have taken on this level of debt just to cover their cost of living is alarming,” CENTRAL program manager Khun Tharo said in the paper.
“Getting deeper into debt is just going to hurt those who’ve already been hit hardest by this crisis.”
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.
The groups called for “immediate debt relief” programs from both MFIs and international investors who they said had spent hundreds of millions of dollars “to burden Cambodians with unmanageable debts.”
They also urged the government to expand borrower protections and enact enforceable, sector-wide regulations that include the temporary suspension of loan repayments and the return of land titles used as collateral, prioritizing hardest-hit borrowers.
Lender responds
On Thursday, ACLEDA issued a statement accusing 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.
“The report is baseless and was written without conducting a proper study,” the bank said.
“It has affected ACLEDA’s reputation and can be regarded as incitement with an intent to defame the banking and financial sector.”
ACLEDA said none of the information in the paper was verified with the country’s lenders, calling it “false and lacking data.”
The statement, which did not explicitly threaten legal action, also demanded that the NGOs cease any further actions that could impact the reputation of banks and MFIs.
ACLEDA appealed to authorities to “take action against any individuals or groups who incite [the people], leading to economic instability and a loss of trust in the banking system.”
Am Sam Ath, deputy director of Licadho’s Human Rights Investigation Team, told RFA’s Khmer Service that he had no comment on ACLEDA’s statement, but said his organization issued last month’s briefing paper “because we are concerned about the workers.”
“We did not seek to incite the workers because the information in the paper is already known,” he said.
Am Sam Ath said Licadho is not concerned about any actions the government might pursue as a result of ACLEDA’s statement.
“What is important is that we have called for solutions because the people are enduring [financial] problems,” he said.
Call for payment suspension
The joint briefing paper and the response by ACLEDA follow a recent appeal by the banned opposition Cambodia National Rescue Party (CNRP) to suspend payments to lenders.
Sam Rainsy, the acting chief of the CNRP, recently urged villagers to stop their loan payments for at least six months in messages posted to social media from Paris, where he has lived since 2015 to avoid a string of what he says are politically motivated charges and convictions. He said such a move is warranted because the government has failed to provide borrowers with assistance during the outbreak.
Sam Rainsy’s calls were met with rage by Prime Minister Hun Sen, who threatened to respond to the attempt to “sabotage” his government by adding to the nearly 20 CNRP opposition officials or activists who authorities have arrested and thrown in prison—most without arrest warrants—since the beginning of the year.
Last week, 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.
Reported by RFA’s Khmer Service. Translated by Samean Yun. Written in English by Joshua Lipes.