Two associations representing Cambodia’s microfinance institutions (MFIs) and banks issued a joint statement Wednesday agreeing to grant borrowers a reprieve from repayment of loans and interest amid the country’s latest and deadliest outbreak of the coronavirus.
The Cambodia Microfinance Association (CMA) and the Association of Banks in Cambodia (ABC) made the announcement a day after more than 100 NGOs called on Cambodia’s government to direct MFIs and lenders to suspend debt and interest collection for at least three months to allow borrowers the ability to shelter at home as the country struggles to contain a viral spread first discovered in late February.
Cambodia, which had largely remained unscathed by the coronavirus in 2020, registered its first death from COVID-19—the disease caused by the virus—last month, a year to the day that that the World Health Organization labeled it a pandemic. Since then, 22 people have died, and Cambodia’s caseload has reached more than 2,900 people.
In Tuesday’s statement, the NGOs noted that borrowers are unable to avoid potential exposure to the coronavirus because they fear losing their land or homes if they cannot repay their debt. In particular, they pointed out that while lenders did temporarily suspend repayments of loan principals, they continued to collect interest accrual, allowing them to collect “record profits” during the past year.
On Wednesday, the CMA and ABC said that around 340,000 people had been able to restructure loans totaling some U.S. $4 billion since the beginning of the pandemic and that they will continue to assist in restructuring loans based on their clients’ needs.
Additionally, they said, clients who have tested positive for COVID-19 or who are in quarantine will be provided temporary forbearance from principal and interest payments.
“Those customers who are infected with COVID-19 will not be charged interest or fined for at least one month and their loans will be automatically restructured,” the statement said.
“They will also be allowed to delay principal payments for three months, provided they have proof of infection.”
Clients in quarantine will be allowed to restructure their loans as well as delay interest and principal payments for one month, the associations said, adding that they will not be fined for late payments.
The CMA and ABC also pledged to inject more funding in a bid to reduce interest rates, restructure loans and waive all fines for first-time homebuyers, and grant “forgiveness” to those who have died—without elaborating on how.
‘Long-term business partners’
CMA spokesman Kaing Tongngy told RFA’s Khmer Service in an interview on Wednesday that as the country’s Feb. 20 outbreak has gotten worse, his association has been working to introduce more measures to assist COVID-19 patients over the past few weeks.
“If we know the customer has been impacted by COVID-19, we will reach out to them via telephone call and, with their consent, restructure their loans,” he said.
Kaing Tongngy said that MFIs and banks consider their customers “long-term business partners,” and are therefore willing to take a loss to help them.
“If they win over the customer’s hearts, the customers will continue to support their businesses in the future,” he said.
Following the appeal by the more than 100 NGOs on Tuesday, government spokesman Phay Siphan told RFA that the requests were impossible to honor because “Cambodia is a free economic market.”
He said debtors and creditors need to determine a path forward between themselves.
“The people can’t rely on the government because they didn’t consult with us when they took the loans,” he said. “They need to be responsible for their own fates.”
Reported by RFA’s Khmer Service. Translated by Samean Yun. Written in English by Joshua Lipes.