Aggressive, exorbitant and misleading lending is mushrooming across social media and mobile phone services, damaging livelihoods and the country’s financial stability, the central bank and National Police said on Thursday, pledging legal action against the lenders.
The country’s overindebtness has increasingly caused concern, with microfinance loan sizes among the biggest in the world and a string of reports finding human rights abuses — coerced land sales, child labor and predatory lending — resulting from the aggression of the financial sector.
On Thursday, the National Bank released a joint statement prepared together with the National Police specifically targeting informal lenders, especially those online.
Authorities have seen unapproved lenders proliferating on social media and through mobile phone services with promotions and unlicensed credit services, it said.
“[They] have misled the public and caused many economic and social consequences through exorbitant interest rates, threats, intimidation and the implementation of fraudulent contracts by taking excessive profits from borrowers, causing damage to people’s livelihoods and putting them in excessive debt,” the statement said.
“This has affected financial stability, public trust, the financial environment and the growth of the banking sector in Cambodia as a whole.”
The statement called on people to report information about illegal lending activities to the National Bank via five hotline numbers: 085 600 002, 085 600 003, 098 220 001, 098 220 002 and 097 278 3030.
People can also use those numbers for advice around illicit financial services, it said, suggesting they only use licensed banks and financial institutions.
The country’s plight of mounting household debt has attracted ongoing research and criticism, including a study commissioned by the German government finding aggressive door-to-door marketing among MFIs, an estimated 167,400 households forced to sell land within five years, and a case for phasing out public funds from the sector.
Licadho’s Am Sam Ath, whose organization has documented what it calls a “human rights crisis” in the sector, said online lenders were ruthless.
“They post [blackmail] pictures, naked pictures, use [borrowers’] pictures and defame them on social media,” Sam Ath said. “Action on this issue should have been taken a long time ago and it should not have been allowed to spread bigger.”
Borrowers unable to repay their loans had killed themselves over their debt, he said. “Others are so hugely indebted because of excessive interest.”
People have reported intimidation and extortion by lenders to the Interior Ministry’s cybercrime department as well as to Licadho, but shame often held them back, he said.
Loan offers posted around walls and public places were also largely illegal, he added.
Last year, Licadho released a video highlighting three women who had been harassed, extorted and blackmailed by informal lenders to repay their debts.
The rights group documented how an online loan provider called Loanly offered the women loans but asked them to send naked photographs or video of themselves via Telegram, along with their location and identity documents. The loan provider then pressured them relentlessly to repay the loan and threatened to release the photos and videos online if they did not comply.
Cambodia Microfinance Association spokesperson Kaing Tongngy said that in the past couple of years groups had emerged actively pushing illegal loans online.
“They aren’t legitimate. Their interest is too high,” Tongngy said, citing examples of interest rates as high as 10-20% per day. “We’ve seen this frequently result in violence and threats.”
There were groups of foreigners also visiting markets in villages around the country to push loans, he said.
“Some of our authorities have not understood it, and haven’t taken action to prevent it,” he said, adding that many people did not know the difference between illegitimate lenders and licensed MFIs.
In addition to poorer rural households ravaged by debt, prominent social media users have also been knocked over by fraudulent lenders.
On TikTok, film actor Van Lyly made a widely shared video about receiving threats from an online lender.
“I already finished paying it back but this person kept calling and messaging … and they kept threatening us,” she said.
The lender had called around to her associates telling them she was deep in debt and tarnishing her reputation, she said.
“I would like to inform brothers and sisters that if they post any pictures, I have nothing to do with them,” Lyly said in the video. Any nude photos posted would be photoshops, she said. “They keep hurting us. … Some have committed suicide because the Chinese threatened them. … They are threatening that they will post my picture.”
Viewers commented on Facebook that they were facing similar problems. “My sister is in trouble. She only borrowed $160 but they are making her pay $1,200,” one user said.
Finance Ministry spokesman Meas Soksensan declined to comment on Thursday.
Advertisements for quick loans are everywhere on Facebook. One page, “Money Loans Fast and Reliable,” promoted lending to “business owners” with only an ID card or family book.
Reached on Thursday, a woman asked for the reporter’s occupation. “I’m sorry but I can’t give you this,” she said of journalists.