NEW: Central bank to set interest rate ceiling, 1 April 2017

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NEW: Central bank to set interest rate ceiling, 1 April 2017

Postby CEOCambodiaNews » Tue Mar 14, 2017 10:39 am

Central Bank Sets Interest Rate Ceiling, Sparking Fears
| March 14, 2017 |

The National Bank of Cambodia announced on Monday that it would set an annual interest rate ceiling of 18 percent for all microfinance institutions (MFIs), sparking concerns that lenders would stop offering smaller loans that often keep the most financially vulnerable afloat.

The measure, set to come into effect on April 1, contradicts conclusions drawn by a National Bank researcher in a report released last year that advises against establishing interest rate ceilings, citing harmful effects on small-scale borrowers.

With the average annual rate on high-risk, small loans currently running from 20 to 30 percent, the new ceiling will “prevent heavy indebtedness and reduce poverty, prevent clients from being charged too high interest rates by microfinance institutions and encourage the effective use of loans,” the bank bank announced in a statement on Monday.

A second statement released by the central bank said the new rules would only apply to new or restructured loans. Central bank officials could not be reached for comment...

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Re: NEW: Central bank to set interest rate ceiling, 1 April 2017

Postby bolueeleh » Tue Mar 14, 2017 10:46 am

and im royally fucked, thanks cambodia, it has been fun
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Re: NEW: Central bank to set interest rate ceiling, 1 April 2017

Postby SinnSisamouth » Tue Mar 14, 2017 11:37 am

i wonder if this means savers will get less?
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Re: NEW: Central bank to set interest rate ceiling, 1 April 2017

Postby Mojo » Tue Mar 14, 2017 2:37 pm

SinnSisamouth wrote:i wonder if this means savers will get less?
Ya think?

18% is awfully low for high risk loans. Standard cc rate in Singapore is 25%.


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Re: NEW: Central bank to set interest rate ceiling, 1 April 2017

Postby CEOCambodiaNews » Wed Mar 15, 2017 9:38 am

-Analysts say the central bank’s unprecedented decision to slash and cap microfinance interest rates at 18 percent a year, allegedly on the orders of Prime Minister HE himself, could bankrupt dozens of microfinance institutions (MFIs) while drying up credit channels to the poor – the very people the populist measure aims to help.

Ngeth Chou, senior consultant at Emerging Markets Consulting (EMC), projected that only the Kingdom’s largest microfinance providers would weather the sudden and drastic interest rate cut, which is slated to come into effect on April 1.

Cambodia had 54 licensed MFIs and seven microfinance deposit-taking institutions (MDIs) as of end-2016, with a total 1.9 million clients and a combined loan portfolio of $3 billion, according to the National Bank of Cambodia (NBC). In addition, several prominent banks, such as Acleda Bank and Sathapana Bank, provide a large volume of microfinance loans to farmers, small businesses and consumers.

Chou said the NBC’s decision to cap annual microfinance interest at 18 percent – nearly half the prevalent rate charged by most MFIs – will turn microlending into a loss-making activity.
He said MFIs that focus on small group lending will be hit the hardest as they must lend at rates between 23 to 25 percent to cover basic operating costs and the high cost of source funds.

Moreover, he speculated that a collapse of the microfinance sector would have severe consequences on the rural poor, cutting off their access to credit.

According to EMC’s research, 37 percent of clients borrow money for food consumption and over a quarter borrow for health care expenses.
“Previous clients will have to turn to private money lenders that generally charge from 5 percent to 10 percent per month, which is far more expensive than what have been charged by MFIs,” he added...
http://www.phnompenhpost.com/business/m ... -mfis-fold
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Re: NEW: Central bank to set interest rate ceiling, 1 April 2017

Postby CEOCambodiaNews » Sat Mar 18, 2017 12:42 pm

Refinancing could bring existing loans under rate cap
Fri, 17 March 2017

Since the central bank issued a decree on Monday that it will cap microfinance interest rates at 18 percent next month, questions have swirled around whether the revised annual rate would also apply to existing loans, while banking experts have said there would be little they could do to stop borrowers from restructuring or refinancing their loans at the lower rate.

According to the articles 4 and 5 of the prakas issued by the National Bank of Cambodia (NBC) on March 14, allegedly on Prime Minister HE’s orders, the 18 percent annual interest rate ceiling is effective for any “new loan contract including restructured loans and refinancing” issued as of April 1. However, the text makes no mention of how existing loans will be affected, or whether refinancing would be mandatory.

However, Yum Sovanna, general secretary for the Cambodia Microfinance Association, an industry body that lobbies on behalf of the Kingdom’s microfinance institutions (MFIs), said the articles in the prakas make it clear it will not impact existing loans, and will only apply to new loan contracts.

[However] “The possibility that clients could switch to other MFIs while they are still repaying a current loan and use that money to repay their loan could happen,” Sovanna said...
http://www.phnompenhpost.com/business/r ... r-rate-cap
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Re: NEW: Central bank to set interest rate ceiling, 1 April 2017

Postby SinnSisamouth » Sat Mar 18, 2017 12:50 pm

However] “The possibility that clients could switch to other MFIs while they are still repaying a current loan and use that money to repay their loan could happen,” Sovanna said...
http://www.phnompenhpost.com/business/r ... r-rate-cap

not if they bring in admin fees etc
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Re: NEW: Central bank to set interest rate ceiling, 1 April 2017

Postby bolueeleh » Sat Mar 18, 2017 5:37 pm

SinnSisamouth wrote:
Sat Mar 18, 2017 12:50 pm
However] “The possibility that clients could switch to other MFIs while they are still repaying a current loan and use that money to repay their loan could happen,” Sovanna said...
http://www.phnompenhpost.com/business/r ... r-rate-cap

not if they bring in admin fees etc
i do charge admin fees and they still do that, financing one loan from another loan, once i found out any of my customers do that they are automatically put into my blacklist, and most khmers have no long sight so they are forever in the poverty loan vicious cycle
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Re: NEW: Central bank to set interest rate ceiling, 1 April 2017

Postby Trinitysmackstain » Sat Mar 18, 2017 5:39 pm

bolueeleh wrote:
Sat Mar 18, 2017 5:37 pm
SinnSisamouth wrote:
Sat Mar 18, 2017 12:50 pm
However] “The possibility that clients could switch to other MFIs while they are still repaying a current loan and use that money to repay their loan could happen,” Sovanna said...
http://www.phnompenhpost.com/business/r ... r-rate-cap

not if they bring in admin fees etc
i do charge admin fees and they still do that, financing one loan from another loan, once i found out any of my customers do that they are automatically put into my blacklist, and most khmers have no long sight so they are forever in the poverty loan vicious cycle
Thats the law.
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Re: NEW: Central bank to set interest rate ceiling, 1 April 2017

Postby bolueeleh » Sat Mar 18, 2017 5:40 pm

Trinitysmackstain wrote:
Sat Mar 18, 2017 5:39 pm

Thats the law.
what law?
Money is not the problem, the problem is no money

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