The International Finance Corporation (IFC), the private development lending arm of the World Bank, is facing complaints from two Cambodian non-governmental organizations (NGOs) for allegedly causing harm to clients in the country’s microfinance industry and breaching its own standards of good governance by serving as Certain microloan providers provide funding.
According to a statement released on May 3, the complaint was filed on behalf of affected borrowers by local community empowerment group Equitable Cambodia and the Cambodia Alliance for the Promotion and Defense of Human Rights.
It details how IFC allegedly failed to meet its obligations to conduct due diligence and monitor projects to ensure compliance with its own performance standards.
The “heavy impact” of microfinance on banks
“As a result, IFC has inflicted severe damage on the loans and investments of six Cambodian microfinance institutions and microfinance banks – ACLEDA, Hattha Bank, Sathapana, Amret, LOLC and Prasac – which together hold the 75% of national microloans,” the statement said.
It noted that a recent overhang of funding totalling $400 million from the International Finance Corporation has further exacerbated the debt problems of Cambodian households that rely on microfinance.
“Cambodian households currently hold nearly 3 million microloans totaling more than $14 billion, and an industry-wide audit of the country’s microloan industry is urgently needed to determine the scope and severity of the harm associated with these loans across the country,” the statement said. said, adding that “lack of due diligence [the IFC’s] Microfinance programs have destroyed lives and communities across Cambodia, and they must take steps to provide real relief to these borrowers. “
More pain than financial relief
The two NGOs went on to say that “reckless investments” by microfinance institutions have resulted in “gross violations of human rights” and abuses involving child labor and violations of indigenous peoples’ land rights.
In Cambodia, the average loan from microfinance institutions has surged sevenfold over the past decade to about $4,200 per household, almost three times the country’s average annual household income, data compiled by the Cambodia Microfinance Association show.
The infusion of capital has continued despite potentially 100% annualized interest rates and aggressive debt collection tactics that have left some borrowers homeless as they are forced to sell their homes to repay their loans. Critics say others have been jailed or even forced to kill themselves to escape debt nightmares.
“It would be wrong to divert hundreds of millions of dollars in poverty alleviation to some of the most predatory lenders,” said one rights advocate, adding, “It has become a promise of a better life for the poor. system, but often exacerbates their suffering.”
The NGO’s statement noted that IFC has accepted the complaint and will conduct an internal review by its Compliance Advisor Ombudsman.
The International Finance Corporation (IFC), the private development lending arm of the World Bank, is facing complaints from two Cambodian non-governmental organizations (NGOs) for allegedly causing harm to clients in the country’s microfinance industry and breaching its own standards of good governance by serving as Certain microloan providers provide funding. According to a statement released on May 3, the complaint was filed on behalf of affected borrowers by local community empowerment group Equitable Cambodia and the Cambodia Alliance for the Promotion and Defense of Human Rights. It details how IFC allegedly failed to meet its obligations to conduct due diligence and oversight projects…
The International Finance Corporation (IFC), the private development lending arm of the World Bank, is facing complaints from two Cambodian non-governmental organizations (NGOs) for allegedly causing harm to clients in the country’s microfinance industry and breaching its own standards of good governance by serving as Certain microloan providers provide funding.
According to a statement released on May 3, the complaint was filed on behalf of affected borrowers by local community empowerment group Equitable Cambodia and the Cambodia Alliance for the Promotion and Defense of Human Rights.
It details how IFC allegedly failed to meet its obligations to conduct due diligence and monitor projects to ensure compliance with its own performance standards.
The “heavy impact” of microfinance on banks
“As a result, IFC has inflicted severe damage on the loans and investments of six Cambodian microfinance institutions and microfinance banks – ACLEDA, Hattha Bank, Sathapana, Amret, LOLC and Prasac – which together hold the 75% of national microloans,” the statement said.
It noted that a recent overhang of funding totalling $400 million from the International Finance Corporation has further exacerbated the debt problems of Cambodian households that rely on microfinance.
“Cambodian households currently hold nearly 3 million microloans totaling more than $14 billion, and an industry-wide audit of the country’s microloan industry is urgently needed to determine the scope and severity of the harm associated with these loans across the country,” the statement said. said, adding that “lack of due diligence [the IFC’s] Microfinance programs have destroyed lives and communities across Cambodia, and they must take steps to provide real relief to these borrowers. “
More pain than financial relief
The two NGOs went on to say that “reckless investments” by microfinance institutions have resulted in “gross violations of human rights” and abuses involving child labor and violations of indigenous peoples’ land rights.
In Cambodia, the average loan from microfinance institutions has surged sevenfold over the past decade to about $4,200 per household, almost three times the country’s average annual household income, data compiled by the Cambodia Microfinance Association show.
The infusion of capital has continued despite potentially 100% annualized interest rates and aggressive debt collection tactics that have left some borrowers homeless as they are forced to sell their homes to repay their loans. Critics say others have been jailed or even forced to kill themselves to escape debt nightmares.
“It would be wrong to divert hundreds of millions of dollars in poverty alleviation to some of the most predatory lenders,” said one rights advocate, adding, “It has become a promise of a better life for the poor. system, but often exacerbates their suffering.”
The NGO’s statement noted that IFC has accepted the complaint and will conduct an internal review by its Compliance Advisor Ombudsman.
