Protesters Demand Their Money Back

Khmer Times
Tin Sokhavuth

The logo of the illegitimate microfinance institution Empire Big Capital Ltd. Supplied

Twenty-two representatives of 71 households in Svay Rieng City gathered on Monday to demand the governor intervene to get back $380,500 they deposited with the illegitimate microfinance institution Empire Big Capital (EBC).

According to Bou Chinnarith, Licadho’s coordinator in Svay Rieng, the microfinance institution (MFI) had encouraged the city’s residents to deposit as much money as possible. In exchange, EBC promised to give them 10 percent interest.

EBC also said that after 18 months, it would pay back depositors their money in addition to the 10 percent interest.

“When they [residents] heard about the 10 percent interest, they all rushed to deposit as much money as they could in EBC. Many households who did not have enough money went to get loans from another bank to deposit in EBC to get 10 percent interest,” said Mr. Channarith.

He added that all 71 households trusted EBC because the employees who convinced them to deposit their money were also their neighbors living in the same district.

Those employees told residents that EBC’s business license had been signed by Prime Minister Hun Sen and Minister of Interior Sar Kheng and their contract was also signed by their village chief as a witness.

EBC paid 10 percent interest for two months, but in October last year, filed for bankruptcy and said another MFI named GMC would be taking over the business.

In December 2015, GMC also declared bankruptcy and as a result, could not afford to pay the interest to its clients.

In January 24, residents complained to local authorities who offered no solution. Residents then took up the matter with provincial police, who called company officials and signed an agreement to pay 30 percent of the total deposited money back to the residents each year. The deal was to start on July 13.

When that day arrived, the company officials did not show up and instead, a police officer came to tell residents that GMC wanted to postpone the deadline. Because of this, residents decided to protest in the city.

Mr. Channarith told Khmer Times that Licadho has been helping residents file separate complaints to the provincial court and is helping them file a collective complaint to the provincial city hall asking for the governor’s intervention.

“They signed contracts with EBC with different dates, so the court asked each of them to file a separate complaint to the court. I already gave them a sample of the complaint yesterday, and we will get the answer from the court soon,” said Mr. Channarith.

The Security Exchange Commission of Cambodia announced in May that EBC had been operating illegally and collecting deposits in the Kingdom.

In March, at a summit on microfinance, Mr. Hun Sen said that stricter rules needed to be applied to NGOs and MFIs as many people were being cheated by illegitimate lenders.

“They have used certain methods to calculate interest rates in a way to cheat and embezzle from borrowers. This way of providing loans is less strict and made in a short-time process,” said the prime minister.

For this reason, Mr. Hun Sen called on the Ministry of Economy and Finance and the National Bank of Cambodia (NBC) to take legal action against NGOs and MFIs who were offering loans in the country illegally.

However, the premier recognized the importance of MFIs in improving people’s living standards over the past decade. He also said about 51 percent of the adult population had used these financial institutions, which have helped reduce poverty and gaps between the rich and the poor in both urban and rural areas.

In February last year, the NBC and the Ministry of Economy and Finance made a joint declaration, telling people who used MFIs to be aware of the rising number of unofficial lenders, many of which claimed to be NGOs or MFIs.

According to a report from the Cambodia Microfinance Association, about $3 billion in loans were disbursed last year, up from $425,921 in 2010, an annual growth rate of 42-53 percent.