Consumers, the public and lawyers in Cambodia are not adequately equipped to deal with the increasing complexities of the banking and financial laws in the country.
Ly Tayseng, a senior lawyer specialising in commercial matters, told The Post that one of the main causes for disputes as well as fraud in financial dealings is the lack of knowledge and literacy in business and financial terms among the public as well as among members of the legal profession.
“The level of financial literacy among Cambodians, in particular, rural Cambodians, is still low. Many Cambodians find it hard to comprehend the complex financial products that are being offered by banks and other institutions.
“The rapid pace of growth in the advancement of technological tools used in the financial industry has left even lawyers and other judicial officers befuddled in terms of knowledge and how various financial products work,” he said.
To redress this lack of financial literacy among both the consumer as well professionals, Tayseng suggested that the Bar Association of the Kingdom of Cambodia and the National Bank of Cambodia (NBC) should embark on joint training in banking and financial laws tailored for lawyers and judges.
“Training can be conducted in the form of workshops or conferences on a specific topic. Another alternative is to have short or medium term training at the Royal Academy for the Judicial Services as well at the lawyer’s training center of the Bar Association.
“In addition, I think the NBC could also provide more training on its banking laws and regulations for practitioners as new laws and regulations are being developed and passed very frequently,” said Tayseng.
He also said that there are not many training or educational programmes that explain personal finance management to ordinary people. This is further compounded by limited access to financial information and guidelines available for consumers or the public.
According to Tayseng, a lot of the confusion starts because people generally have a lack of a deep understanding of technical terms used in loan agreements and security documents.
“Lack of proper advice and adequate guidance on the complexity of the contractual provisions and the risk involving the facility granted to the customers causes a lot of problems. The consumers tend to be victims of the contracts they themselves have signed with lenders who are better equipped and who have received better advice from their lawyers,” he said.
Tayseng added that financial literacy is very important for consumers and the public at large. Without sufficient knowledge or proper advice from lawyers, consumers are at a disadvantage when entering into loan agreements with lenders on equal basis.
“In addition, ordinary people will be in the dark as to how to protect their legitimate interests. Some lenders may act in good faith but others tend to take advantage of the ignorance of consumers. Financial literacy would help consumers to avoid pitfalls from unscrupulous lenders, avoid financial fraud or scams.
“Now, with advanced technologies and increasing complexity of financial products, it is easier for consumers who are not well versed with the intricacies of modern finance to fall victims in dealings that promise high returns,” he said.
Tayseng added that he often receives cases involving either a misunderstanding or a difference in interpretation of contractual terms or clauses.
“Some of the cases involve a lack of understanding by the consumers. However, there are cases where the lenders do not provide sufficient information or proper explanation of the terms of the contact.
Tayseng said that as lenders who are professionals, they are duty bound to give a proper explanation of the contractual terms, including the financial implications and act in good faith when dealing with the consumers.
But, he emphasised, financial literacy, is the best insurance against fraudulent transactions.