Debt relief measures by micro-lenders in Cambodia have failed to alleviate the financial burdens facing indebted families, Human Rights Watch (HRW) said Tuesday, urging the government to suspend loan collections for borrowers who are no longer able to meet payments during the coronavirus pandemic.
HRW said in a statement that the governmentâ€™s response to the outbreak has been insufficient to protect borrowers, who have increasingly been forced to sell land and property to make payments, while micro-loan providers have also failed in their human rights responsibilities to those in debt.
â€œMany Cambodians fear losing their land more than catching the coronavirus because they canâ€™t pay back their loans and the government has done little to help them,â€ saidÂ Phil Robertson, HRWâ€™s deputy Asia director.
â€œThe Cambodian government should immediately order a freeze on debt collection and interest accruals of those harmed by the pandemic, and hold financial institutions that fail to comply accountable.â€
Late last month, Cambodian rights groups 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 â€œWorked to Debt,â€ which said that tens of thousands of garment workers will struggle to repay microfinance debts during work stoppages and factory suspensions caused by the virus.
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. Cambodiaâ€™s average microloan size far surpasses that of the rest of the world at U.S. $3,804.
Regardless, the National Bank of Cambodia, which licenses and regulates micro-loan providers, has never issued strong consumer protection regulations to protect borrowers from unethical lending practices andâ€”while encouraging relief for workers impacted by the coronavirusâ€”has largely left it to individual financial institutions to determine which of their clients should be granted leniency.
But beyond simply failing to regulate the industry, Cambodiaâ€™s government has gone so far as to threaten borrowers who have struggled to repay their debts while unable to draw an income during the coronavirus shutdown.
On June 24, Prime Minister Hun Sen told loan providers to â€œconfiscate properties of those [borrowers] who follow the oppositionâ€™s appeal not to pay back the loans.â€
Sam Rainsy, the acting chief of the banned opposition Cambodia National Rescue Party (CNRP), had earlier urged villagers to stop their loan payments for at least six months in messages posted to social media from self-imposed exile. He said such a move is warranted because the government has failed to provide borrowers with adequate assistance during the outbreak.
Sam Rainsyâ€™s calls were met with rage by Hun Sen, who threatened to respond to the attempt to â€œsabotageâ€ his government by adding to the nearly 20 CNRP opposition officials or activists who authorities have arrested and thrown in prisonâ€”most without arrest warrantsâ€”since the beginning of the year.
Meanwhile, the government in April refused to accept petitions from more than 100 community, union, and civil society groups demanding an urgent response to the debt crisis exacerbated by the outbreak, and even detained some of the representatives, interrogating them about who was behind the action and compelling them to sign pledges promising not to advocate.
â€œThe authoritiesâ€™ harassment of peaceful protesters simply trying to hand over a petition shows that the government is unwilling to even consider the demands of those trying to prevent homelessness during a pandemic,â€ Robertson said.
Instead, HRW said, Cambodiaâ€™s government should be implementing measures such as direct financial assistance for, or deferral of, mortgage payments and suspension of debt collection, as well as economic support for those who face losing essential services because they have lost their jobs, face pay cuts, and are struggling to pay off loans.
â€œWithout a moratorium on debt collection, indebted Cambodians will have little choice but to take on more debt from micro-loan providers,â€ Robertson said.
â€œThe government should immediately end coercive practices that result in people losing land and housing, and effectively regulate microfinance lending to ensure financial institutions act to benefit their clients rather than plunge them further into debt.â€
Response to statement
Responding to HRW, government spokesperson Phay Siphan dismissed the rights groupâ€™s statement as â€œinaccurateâ€ and â€œof little interest,â€ telling RFAâ€™s Khmer Service that Cambodiaâ€™s National Bank has already developed a plan to assist those in need.
â€œThe government instructed the National Bank governor to draw up policies to provide relief to debtors,â€ he said.
â€œThe banking sector is also very activeÂ in helping [people], so what is in the HRWâ€™s report â€¦ does not reflect the actual situation in Cambodia.â€
Cambodia Microfinance Association spokesman Kaing Tongngy told RFA that microfinance institutions (MFIs) have restructured loans to customers impacted by the coronavirus, including by granting special payment plans for between three and six months.
He said such assistance would continue â€œuntil late this year,â€ but that debts will not be forgiven.
â€œWe cannot do thatâ€”it is against the law,â€ he said.
In June, Licadho, CENTRAL, and CATU warned in their joint briefing paper that the outbreak was â€œcreating a mounting human rights crisisâ€ in Cambodia and warned that without relief from debts owed to MFIs, many of workers would resort to selling their land or homes, eating less food, or taking out even more loans to repay what they borrowed.
Reported by RFAâ€™s Khmer Service. Translated by Samean Yun. Written in English by Joshua Lipes.