Cambodians Forced to Sell Assets to Repay Loans as Coronavirus Hammers Economy

As the coronavirus pandemic continues to hammer the economy, many Cambodians are being forced to sell their livestock and farms to pay off debts to banks and microfinance institutions, prompting calls for the government to prevent lenders from collecting during the outbreak.

Some Cambodians told RFA’s Khmer Service that creditor’s agents have even been visiting their homes and demanding loan repayment even though the National Bank of Cambodia has urged them not to do so amid the health crisis, which has seen 124 people in Cambodia become infected with COVID-19, the disease caused by the coronavirus.

A villager from Svay Rieng province, who spoke to RFA on condition of anonymity out of concerns for his security, said an agent from microfinancer Amret MFI visited him recently and threatened to confiscate his property if he refused to pay the U.S. $10,000 he owes, including interest and principle.

He said he was forced to sell off half of a hectare (1.25 acres) of farmland to settle the debt.

“They told me to pay the debt within four to five months, otherwise they would foreclose on my house and auction it,” he said.

RFA spoke to a representative of Amret who said that the lender “needs time to investigate the case in detail” before it could comment on the case.

A resident of the capital Phnom Penh named Heng Sopheak said he owes money to lenders AMA and LOLC Microfinance but cannot afford to pay the debt.

“I don’t have money to pay them on time, but they asked me to sell whatever I can to erase my debt,” he said.

“I owe a lot of money and I can barely find enough food to eat. They have demanded that I pay, even after I begged them [to give me more time].”

A villager from Angkor Thom district in Siem Reap province named Teng Kroeung told RFA that her creditor would not provide her any relief from her U.S. $10,000 loan, despite the extenuating circumstances of the outbreak.

She said her two children had planned to take jobs in Thailand to help repay the debt, but the border has been closed to prevent the spread of the virus.

“They refused to delay my payment,” she said, adding that she was forced to sell three cows to honor her debt.

“I am very sad because my children wanted to go to Thailand, but the border has already closed.”

RFA was unable to reach National Bank of Cambodia general director Chea Chanto for comment on Tuesday.

Requesting relief

Cambodia Microfinance Association (CMA) spokesman Kaing Tongngy told RFA his group has urged those impacted by the outbreak to request a refinancing of their debts, saying the process is straightforward.

“I urge them to talk directly to the microfinance institution and ask them to consider refinancing the loans because of the coronavirus—the staff will provide them with documentation,” he said. “It isn’t complicated.”

To date, CMA has accepted 175,364 customers’ requests to refinance or change the terms of their loans and 90 percent of them have been approved, amounting to around U.S. $656 million, he said.

Kaing Tongngy’s comments came a week after In Channy, the chief executive officer and president of Acleda Bank Plc, told RFA that the banking sector is handling debtors impacted by the outbreak “very gently,” based on guidance by the government.

He noted that the central bank had decreased some capital requirements, allowing banks and microfinance institutions greater leeway to assist borrowers.

“Banks and microfinance lenders made the request and it was approved, so we can access more capital to support our operations and customers,” he said, adding that government measures have been “sufficient,” and no further action is needed.

‘Facing a debt crisis’

But in a statement issued Sunday, the banned opposition Cambodia National Rescue Party (CNRP) told RFA that the outbreak has cost millions of Cambodians their jobs and incomes, specifically highlighting the plight faced by those indebted to lenders.

“The most serious issue is that people are facing a debt crisis,” the statement read, adding that based on research by nongovernmental organizations, some 2.5 million people owe money that they cannot repay.

“This issue is a danger to people’s livelihoods and health, because they will continue to lose property, land, and homes if the government doesn’t take any appropriate measures to resolve the debt crisis.”

According to the CNRP, simply encouraging lenders to reconsider the terms of loans based on individual situations is “ineffective,” and has produced few results.

“People who are in debt have not been given any relief, leading some to sell their properties or seek other loans with higher interest rates [to repay the original ones], while others risk [health and legal issues] migrating to work in Thailand to earn money to pay their debts,” the statement said.

“The CNRP has reiterated its appeal to the Phnom Penh government to put in place strict measures to delay or suspend the payment of debts to microfinance institutions or banks for at least three months and to protect properties from confiscation.”

The party also called for the introduction of a stimulus package to help those lenders impacted by such government measures.

‘Stop asking’

Speaking to RFA from self-imposed exile in France, where he has lived since 2015 to avoid a string of charges and convictions he says are politically motivated, acting CNRP chief Sam Rainsy said the measures his party has proposed would not be permanent, and only in effect during the pandemic.

“We need a collective solution for two to three million people who are in debt and currently are unable to pay,” he said, adding that if the economy had not improved during a three-month moratorium on interest and principle payments, “we would need to continue the suspension.”

Those affected by the outbreak “should not need to request relief,” he said.

“Banks and microfinance institutions simply need to stop asking people to repay their debts until the outbreak is over.”

Reported by RFA’s Khmer Service. Translated by Samean Yun. Written in English by Joshua Lipes.

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