Phnom Penh, 10 Oct 2025 , Cambodia’s $17 billion microfinance industry is facing mounting accusations of predatory lending after more than 200,000 borrowers defaulted in the past twelve months and dozens of land titles were transferred to lenders through foreclosure proceedings. Parliamentary hearings that opened Monday in the National Assembly will examine whether 30 licensed microcredit institutions (MCIs) and seven commercial banks violated interest-rate caps, collateral rules, and consumer-protection laws introduced in 2022.
surge in defaults triggers parliamentary probe
The inquiry was triggered by a 38 percent jump in non-performing loans recorded by the National Bank of Cambodia (NBC) between July 2024 and June 2025. Lawmakers will review internal loan files, marketing scripts, and foreclosure records submitted by the country’s largest microlenders, including Prasac, Amret, and Acleda Bank’s microfinance arm. “We have received 1,700 written complaints and 300 witnesses willing to testify,” said Yim Sovann, chair of the National Assembly’s Banking and Finance Commission. “The committee will determine whether aggressive sales tactics and hidden fees pushed borrowers beyond statutory debt-to-income limits.”
According to NBC data, the average microloan reached $4,140 this year, the highest in Southeast Asia relative to per-capita income. Rural households now dedicate an estimated 42 percent of monthly earnings to service micro-debt, up from 28 percent five years ago. The central bank tightened consumer-lending rules in March, capping effective interest at 18 percent and requiring lenders to verify disposable income, yet lawmakers say enforcement has been uneven.
borrowers describe land-loss spiral
Outside the hearing hall, farmers from Kampong Speu and Battambang provinces displayed title deeds they surrendered after falling behind on repayments. Sokha Keo, 51, said she borrowed $3,000 in 2023 to pay for her husband’s appendectomy but saw the debt balloon to $5,700 once insurance and processing fees were added. “When the rice price dropped, we could not pay. The officer said sign this paper or face court,” Keo told reporters. She transferred two hectares to an MCI-linked real-estate firm in May. Land-transfer records compiled by the NGO Licadho show at least 420 similar cases since January.
Microfinance institutions defend their practices. Hout Ieng Tong, president of the Cambodia Microfinance Association (CMA), told the committee that foreclosure is a “last resort” representing less than 0.3 percent of outstanding loans. “Our members follow NBC guidelines and exhaust restructuring options before any legal action,” he said. CMA data indicates that 62 percent of delinquent borrowers received term extensions or grace periods in the past year.
regulators face pressure to strengthen oversight
The NBC has already suspended three small lenders for charging effective rates above 20 percent and ordered them to reimburse $1.2 million to 9,400 clients. Governor Chea Chanto warned the industry on 8 Oct that “further sanctions, including license revocation, are on the table if consumer protection is treated as optional.” Central-bank inspectors are conducting on-site audits at the seven largest microlenders and will report findings next month.
International investors are watching closely. MicroLoan Capital, a Luxembourg fund that holds Amret bonds, wrote to the Finance Ministry last week requesting “clarity on asset-recovery procedures and regulatory capital treatment.” Roughly 30 percent of Cambodian microcredit is financed through offshore special-purpose vehicles. A sudden change in foreclosure rules could “materially impair” recovery values, the fund warned.
draft law aims to cap household debt ratio
Parallel to the hearings, the Finance Ministry has circulated a draft consumer-credit law that would limit monthly repayments to 50 percent of verified net income and require lenders to restructure loans once arrears exceed 90 days. The proposal also introduces collective-action rights, allowing groups of borrowers to sue for unfair practices. Banks oppose the income-verification clause, arguing that many Cambodians earn seasonal cash income that is hard to document. “If we are forced to treat every farmer like a salaried employee, credit will dry up in rural areas,” said Bun Mony, vice-chairman of the Association of Banks in Cambodia.
Civil-society groups counter that self-regulation has failed. “Ten years ago microcredit was hailed as a path out of poverty; today it is pushing people into landlessness,” said Naly Pilorge, director of Licadho. Her organisation has petitioned the assembly to cap individual indebtedness at one year’s net income and to ban the use of primary-residence land titles as collateral. The United Nations country team submitted a technical note on 5 Oct estimating that 90,000 Cambodians slipped below the national poverty line this year partly because of debt service.
Whether the assembly will adopt tougher rules remains uncertain. The ruling Cambodian People’s Party holds all committee seats, and several senior lawmakers sit on microfinance bank boards. Yet public anger is palpable: more than 4,000 people have joined an online petition titled “Stop Debt-Driven Land Grabs” since Sunday. Committee chair Sovann pledged that hearings will run for three weeks and produce a public report with legislative recommendations by early November. Farmers like Sokha Keo are waiting. “I only want my land back,” she said. “Without it, my children will have nothing.”
