ABC, CMA set out six debt relief measures

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Cambodia Microfinance Association (CMA) members have restructured more than $1.4 billion in loans for nearly 300,000 borrowers since March 27, 2020. Hong Menea

The Association of Banks in Cambodia (ABC) and Cambodia Microfinance Association (CMA) on April 7 ordered members to adopt six measures of financial relief in light of the economic fallout and depressed incomes caused by the February 20 community transmission of Covid-19.

The non-legally binding command came a day after a coalition of 103 civil society organisations (CSOs) reiterated a call for the government to issue a set of guidelines for all financial institutions in Cambodia to suspend loan payments, set interest rates to zero per cent and waive accrued interest for at least three months to help borrowers cope during the latest Covid-19 pandemic surge.

 

The move would allow debtors to remain at home and stay safe during the pandemic, free of the fear of losing their land or housing over unpaid debt.

In a joint statement, ABC and CMA addressed the rise in documented novel coronavirus cases and heightening risk of infection.

“After monitoring the ramifications [of the latest outbreak], banking and financial institutions [under ABC and CMA] – all member institutions – are to continuously and fully put these policies into action,” the statement said, calling on members to also follow the guidelines outlined in the National Bank of Cambodia’s (NBC) March 27, 2020 directive on credit restructuring.

The first of the associations’ six orders is to exempt clients infected with the coronavirus from interest payments and penalties for at least one month, and automatically restructure credit (with the client’s consent), deferring principal payments for three months.

Clients purporting to be infected with the virus must present a positive test result confirmed by the relevant authority, the statement added.

Second, automatically restructure credit for clients under quarantine (with their consent), deferring principal and interest payments for one month, and waiving all penalties.

 

Third, provide prompt, convenient credit-restructuring benefits to clients affected by the pandemic.

Fourth, ease the terms of emergency and supplementary financing loans and cut interest rates to sustain and rehabilitate family economies during and after the health crisis.

Fifth, restructure loans for first homes and waive all penalties.

Sixth, offer as many benefits as possible to clients who have died of Covid-19.

Prasac Microfinance Institution Ltd (Prasac) senior vice-president Say Sony welcomed the move, saying: “What clients need is to reschedule loans to match their cash flow in these tough times, and when the community outbreak is contained, they’ll likely require more funds or loans to restart and reinvest in their businesses.”

The statement noted that all financial institutions have a similar funding structure – 15 per cent from paid-up capital, 15 per cent from long-term debt issued domestically and internationally and 70 per cent from savings deposits.

As of end-February, financial institutions in Cambodia restructured about $4 billion in loans for some 340,000 borrowers since the NBC issued the directive, it said.

Debtors are allowed to pay either interest or principal, it said, adding that most have requested between three and six months’ grace period and agreed to pay only interests, while those severely affected by the pandemic were granted the suspension of loan repayment and interest for three to six months.

Credit-restructuring transactions will continue as long as the pandemic persists and plans will be drawn up according to each client’s situation, it added.