MFIs Urged To Consider Moveable Assets As Loan Collateral

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Out of the total number of borrowers in Cambodia, 28 percent have multiple outstanding loan accounts, often taking out loans to buy moveable assets such as motorbikes, cars and agricultural equipment.

Moveable assets such as cars, motorbikes, agricultural machinery and crop stocks should also be considered as loan collateral by Cambodia’s microfinance institutions (MFIs), economic researcher Pen Vanndarong noted during his speech at the third annual macroeconomic conference held by the National Bank of Cambodia last Friday.

Vanndarong, an independent researcher and employee of local microlender Hattha Kaksekar Ltd, said that if the microfinance sector is to continue to grow here, MFIs should overhaul their lending strategies and not just focus on land or property as the sole collateral in securing loans.

“However, the government and related institutions should develop a comprehensive platform to ensure that risk can be mitigated,” he added. “For instance, the Ministry of Public Works and Transportation and the Ministry of Interior should be involved in setting more advanced techniques in order to justify what are legal or illegal assets.”

Cambodia had over $3 billion in outstanding loans as of the end of September, with 28 percent of borrowers holding multiple accounts in arrears, according to a report by the Credit Bureau Cambodia, the Kingdom’s only independent credit monitoring agency. Often these loans are taken out to purchase the exact same moveable assets as Vanndarong is proposing to be considered as collateral.

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