$8 Billion of Personal Loans Push Cambodia to Brink of Crisis
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$8 Billion of Personal Loans Push Cambodia to Brink of Crisis
from Bloomberg:
Skyrocketing micro-finance debt in Cambodia has left millions of people at risk of losing their homes, leading to fears of a potential political and economic crisis.
With a median of $3,370 per loan, Cambodia now has the highest average for small loans in the world, according to a report from the Cambodian League for the Promotion and Defense of Human Rights and Samakum Teang Tnaut on Wednesday. Altogether, nearly 15% of the population held at least $8 billion in micro loan debt at the start of the year, the data show.
"It is a big issue and it’s one that could have political ramifications," said Ou Virak, director of Phnom Penh-based think-tank Future Forum. "Since there is no personal bankruptcy protection, delinquency could and will likely lead to the repossession of homes or family farms."
The question is, Virak said, "would the government stand with the banks or the people."
Predatory Lending
Loan sizes have grown four times faster than household incomes in recent years, while the country’s poorest suffer a culture of predatory lending practices, the ‘Collateral Damage’ report found. Unable to pay back high interest rates, borrowers are often coerced into land sales, child labor and debt-driven migration.
"Microfinance debt in Cambodia, the majority of which is collateralized by land titles, poses a significant threat to land tenure security for indebted families and has led to serious and systematic human rights abuses in the country," the report states.
In an effort to quell the rising debt, the government imposed an annual interest rate cap of 18%, a measure the report said was "ineffective." It also became an issue in the lead up to the 2018 general elections as Prime Minister Hun Sen sought to distance his government from the private MFIs amid growing anger from the public.
A government spokesman did not immediately respond to requests for comment.
Read more: Microfinance Runs Amok in Cambodia Where ‘Everybody Has a Loan’
Developed in the mid-1990s to provide credit to poor Cambodians following the Khmer Rouge genocide and ensuing civil war, microfinance loans were once touted as a financing alternative to banks. Now experts believe they pose a grave risk to a country that has fallen deeper into debt.
Mostly owed to just nine lenders, the total outstanding amount is equal to roughly a third of the country’s entire GDP for 2018, while seven largest MFIs made more than $130 million in profit in 2017, the report states.
The $8 billion figure also represents a significant increase from a decade ago when Cambodia’s total MFI portfolio was just $300 million, it says citing data from the Cambodia Microfinance Association.
"These same MFIs have relied on inadequate government regulation and the widespread complicity of local authorities to facilitate and pressure coerced land sales, extracting hundreds of millions of dollars in profit from many of Cambodia’s poorest families," the report found.
https://www.bloomberg.com/news/articles ... tRO04GZJvM
Skyrocketing micro-finance debt in Cambodia has left millions of people at risk of losing their homes, leading to fears of a potential political and economic crisis.
With a median of $3,370 per loan, Cambodia now has the highest average for small loans in the world, according to a report from the Cambodian League for the Promotion and Defense of Human Rights and Samakum Teang Tnaut on Wednesday. Altogether, nearly 15% of the population held at least $8 billion in micro loan debt at the start of the year, the data show.
"It is a big issue and it’s one that could have political ramifications," said Ou Virak, director of Phnom Penh-based think-tank Future Forum. "Since there is no personal bankruptcy protection, delinquency could and will likely lead to the repossession of homes or family farms."
The question is, Virak said, "would the government stand with the banks or the people."
Predatory Lending
Loan sizes have grown four times faster than household incomes in recent years, while the country’s poorest suffer a culture of predatory lending practices, the ‘Collateral Damage’ report found. Unable to pay back high interest rates, borrowers are often coerced into land sales, child labor and debt-driven migration.
"Microfinance debt in Cambodia, the majority of which is collateralized by land titles, poses a significant threat to land tenure security for indebted families and has led to serious and systematic human rights abuses in the country," the report states.
In an effort to quell the rising debt, the government imposed an annual interest rate cap of 18%, a measure the report said was "ineffective." It also became an issue in the lead up to the 2018 general elections as Prime Minister Hun Sen sought to distance his government from the private MFIs amid growing anger from the public.
A government spokesman did not immediately respond to requests for comment.
Read more: Microfinance Runs Amok in Cambodia Where ‘Everybody Has a Loan’
Developed in the mid-1990s to provide credit to poor Cambodians following the Khmer Rouge genocide and ensuing civil war, microfinance loans were once touted as a financing alternative to banks. Now experts believe they pose a grave risk to a country that has fallen deeper into debt.
Mostly owed to just nine lenders, the total outstanding amount is equal to roughly a third of the country’s entire GDP for 2018, while seven largest MFIs made more than $130 million in profit in 2017, the report states.
The $8 billion figure also represents a significant increase from a decade ago when Cambodia’s total MFI portfolio was just $300 million, it says citing data from the Cambodia Microfinance Association.
"These same MFIs have relied on inadequate government regulation and the widespread complicity of local authorities to facilitate and pressure coerced land sales, extracting hundreds of millions of dollars in profit from many of Cambodia’s poorest families," the report found.
https://www.bloomberg.com/news/articles ... tRO04GZJvM
"Predatory Lending" sums it up.
"Not my circus, not my monkeys" - KiR
- batshitcrazyweirdo
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No, it's Bloomberg. Full of shit as usual.
I love bitches n gonna fuck Texas and the USA+ right up their god damn ass! Hallelujah!
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I noticed an article about this in the Phnom Penh Post recently. Guess what? The National Bank are still stating around 1% default rate.
I really don't know why you bothered posting this on this site, as it was obvious to me on the last thread that the majority of members here are pro MFI. Vested interests, no doubt.
I really don't know why you bothered posting this on this site, as it was obvious to me on the last thread that the majority of members here are pro MFI. Vested interests, no doubt.
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- MerkinMaker
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So it now turns out that this report was based on findings from a sample size of 28 in 3 million.
That sounds legit...
That sounds legit...
- Petrol Head
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Invite the MFI around for a drink and give ‘em the old chop chop and freezer treatment.
Problem solved.
Problem solved.
Haha - my money’s on Playboy
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Only a complete idiot would base a survey on just 28 families/ people. The Phnom Penh Post is owned by the Cambodian government/ Chinese, isn't it? Perhaps a bit of Cambodian/Chinese poetic license?starkmonster wrote: ↑Fri Aug 09, 2019 8:26 amSo it now turns out that this report was based on findings from a sample size of 28 in 3 million.
That sounds legit...
Stick with the official 1% default rate. If financial institutions that are set up to help the poor and vulnerable lie about that, what else are they lying about?
The impairment rates are clearly visible in the NBC annual report for 2018. The average bank impairment rate is 2.2%.
The MDIs (i.e. the big boys) are running at around 0.7% impairment on average, MFIs (i.e. the also rans) at 1.3%. That said, some MFIs have truly awful figures - T&Go Finance for instance sitting at 66.1%, Queen Finance 60% - these are all surely irrelevant due to the tiny customer base versus say a Ly Hour Microfinance (0.1%), Woori Finance (0.0x%). The worst performer on pure number of loans overdue is Piphup Thmey with 22k+ loans now recorded as impaired.
There's lots of good, and also some truly awful stuff in the report, but nothing like the reported findings.
The MDIs (i.e. the big boys) are running at around 0.7% impairment on average, MFIs (i.e. the also rans) at 1.3%. That said, some MFIs have truly awful figures - T&Go Finance for instance sitting at 66.1%, Queen Finance 60% - these are all surely irrelevant due to the tiny customer base versus say a Ly Hour Microfinance (0.1%), Woori Finance (0.0x%). The worst performer on pure number of loans overdue is Piphup Thmey with 22k+ loans now recorded as impaired.
There's lots of good, and also some truly awful stuff in the report, but nothing like the reported findings.
Meum est propositum in taberna mori,
ut sint Guinness proxima morientis ori.
tunc cantabunt letius angelorum chori:
"Sit Deus propitius huic potatori."
ut sint Guinness proxima morientis ori.
tunc cantabunt letius angelorum chori:
"Sit Deus propitius huic potatori."
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And where did the NBC get those figures from?Spigzy wrote: ↑Fri Aug 09, 2019 10:54 amThe impairment rates are clearly visible in the NBC annual report for 2018. The average bank impairment rate is 2.2%.
The MDIs (i.e. the big boys) are running at around 0.7% impairment on average, MFIs (i.e. the also rans) at 1.3%. That said, some MFIs have truly awful figures - T&Go Finance for instance sitting at 66.1%, Queen Finance 60% - these are all surely irrelevant due to the tiny customer base versus say a Ly Hour Microfinance (0.1%), Woori Finance (0.0x%). The worst performer on pure number of loans overdue is Piphup Thmey with 22k+ loans now recorded as impaired.
There's lots of good, and also some truly awful stuff in the report, but nothing like the reported findings.
The MFIs who operate in a non transparent way.
So again, you're trusting MFIs who have a vested interest in manipulating their figures
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- MerkinMaker
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I agree, only a complete idiot would base a survey on just 28 families. And I arrest my case:Chneseexpat wrote: ↑Fri Aug 09, 2019 10:14 amOnly a complete idiot would base a survey on just 28 families/ people. The Phnom Penh Post is owned by the Cambodian government/ Chinese, isn't it? Perhaps a bit of Cambodian/Chinese poetic license?
https://www.licadho-cambodia.org/report ... 082019.pdf
It's right there in the executive summary.
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Haha. I haven't read the full report yet, but it does sound idiotic. It makes a mockery of the whole report even when viewed by those criticizing MFIs.starkmonster wrote: ↑Fri Aug 09, 2019 12:13 pmI agree, only a complete idiot would base a survey on just 28 families. And I arrest my case:Chneseexpat wrote: ↑Fri Aug 09, 2019 10:14 amOnly a complete idiot would base a survey on just 28 families/ people. The Phnom Penh Post is owned by the Cambodian government/ Chinese, isn't it? Perhaps a bit of Cambodian/Chinese poetic license?
https://www.licadho-cambodia.org/report ... 082019.pdf
It's right there in the executive summary.
Do you have any comments regarding their key recommendations?
I have one: use a larger sample size if you wish to be taken seriously.
Most of the bank and bigger MFI annual reports would have been audited externally by KPMG, PWC, etc - are they also blind, or worse still, complicit?Chneseexpat wrote: ↑Fri Aug 09, 2019 12:06 pmAnd where did the NBC get those figures from?Spigzy wrote: ↑Fri Aug 09, 2019 10:54 amThe impairment rates are clearly visible in the NBC annual report for 2018. The average bank impairment rate is 2.2%.
The MDIs (i.e. the big boys) are running at around 0.7% impairment on average, MFIs (i.e. the also rans) at 1.3%. That said, some MFIs have truly awful figures - T&Go Finance for instance sitting at 66.1%, Queen Finance 60% - these are all surely irrelevant due to the tiny customer base versus say a Ly Hour Microfinance (0.1%), Woori Finance (0.0x%). The worst performer on pure number of loans overdue is Piphup Thmey with 22k+ loans now recorded as impaired.
There's lots of good, and also some truly awful stuff in the report, but nothing like the reported findings.
The MFIs who operate in a non transparent way.
So again, you're trusting MFIs who have a vested interest in manipulating their figures
I'd agree with you however on the level of "in-depth" supervision from the NBC is not there. I can tell you from first hand experience that I reported a clear AML issue in one financial institution to the FIU department and got a McCoy "We just don't have the (man)power!!" response.
Meum est propositum in taberna mori,
ut sint Guinness proxima morientis ori.
tunc cantabunt letius angelorum chori:
"Sit Deus propitius huic potatori."
ut sint Guinness proxima morientis ori.
tunc cantabunt letius angelorum chori:
"Sit Deus propitius huic potatori."
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Kind of speaks for itself, yes?Chneseexpat wrote: ↑Fri Aug 09, 2019 12:41 pmHaha. I haven't read the full report yet, but it does sound idiotic. It makes a mockery of the whole report even when viewed by those criticizing MFIs.
ירי ילדים והפצצת אזרחים דורש אומץ, כמו גם הטרדה מינית של עובדי ההוראה.
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I think you'd have to agree that it is possible:Spigzy wrote: ↑Fri Aug 09, 2019 4:28 pmMost of the bank and bigger MFI annual reports would have been audited externally by KPMG, PWC, etc - are they also blind, or worse still, complicit?Chneseexpat wrote: ↑Fri Aug 09, 2019 12:06 pmAnd where did the NBC get those figures from?Spigzy wrote: ↑Fri Aug 09, 2019 10:54 amThe impairment rates are clearly visible in the NBC annual report for 2018. The average bank impairment rate is 2.2%.
The MDIs (i.e. the big boys) are running at around 0.7% impairment on average, MFIs (i.e. the also rans) at 1.3%. That said, some MFIs have truly awful figures - T&Go Finance for instance sitting at 66.1%, Queen Finance 60% - these are all surely irrelevant due to the tiny customer base versus say a Ly Hour Microfinance (0.1%), Woori Finance (0.0x%). The worst performer on pure number of loans overdue is Piphup Thmey with 22k+ loans now recorded as impaired.
There's lots of good, and also some truly awful stuff in the report, but nothing like the reported findings.
The MFIs who operate in a non transparent way.
So again, you're trusting MFIs who have a vested interest in manipulating their figures
E&Y
EY Hong Kong resigned from the audit of Standard Water on when it emerged that although EY Hong Kong had signed off the audit, it had been effectively outsourced to the affiliate in mainland China, which had received 99.98% of the fee. This was important because shareholders have less confidence in mainland auditors and because audit papers on the mainland are subject to state secrecy laws and can be withheld from outside regulators. EY's quality and risk management leader (Greater China) even testified in the Court of First Instance that he was not sure whether there was a formal agreement covering the relationship between the two EY entities. The court case in 2013 came as US regulators were taking an interest in similar cases of accounting fraud in mainland China.
KPMG
In 2006, Fannie Mae sued KPMG for malpractice for approving years of erroneous financial statements.
In March 2008, KPMG was accused of enabling "improper and imprudent practices" at New Century Financial, a failed mortgage company, and KPMG agreed to pay $80 million to settle suits from Xerox shareholders over manipulated earnings reports.
It was announced in December 2008 that two of Tremont Group's Rye Select funds, audited by KPMG, had $2.37 billion invested with the Madoff "Ponzi scheme."Class action suits were filed..
In August 2011, KPMG conducted due diligence work on Hewlett Packard's $11.1 billion acquisition of the British software company Autonomy. In November 2012 HP announced an $8.8 billion write off due to "serious accounting improprieties" committed by Autonomy management prior to the acquisition..
In 2015, KPMG was accused by the Canada Revenue Agency of tax evasion schemes: "The CRA alleges that the KPMG tax structure was in reality a 'sham' that intended to deceive the taxman."
In 2016, the Canada Revenue Agency was found to have offered an amnesty to KPMG clients caught using an offshore tax-avoidance scheme on the Isle of Man.
In 2017, KPMG terminated five partners in its audit practice, including the head of its audit practice in the US, after an investigation of advanced confidential knowledge of planned audit inspections by its Public Company Accounting Oversight Board. This followed criticism about KPMG's failure to uncover illegal sales practices at Wells Fargo or potential corruption at FIFA, the governing international body of soccer. It was reported in 2017 that KPMG had the highest number of deficiencies, among the Big Four, cited by its regulator in the previous two years.This includes two annual inspections that were compromised as a result of advanced access to inspection information. In March 2019, David Middendorf and Jeffrey Wada, co-defendants in the scandal, were convicted.
In 2017, KPMG paid a $6.2 million fine to the US Securities and Exchange Commission for inadequacies in its audit of the financial statements of oil and gas company, Miller Energy Resources.
In November 2017, 91 partners of KPMG faced contempt proceedings in Hong Kong High Court, as China Medical Technologies (CMED) liquidators investigating a $400 million fraud took action against KPMG with regard to its refusal honor a February 2016 court order to produce Chinese working papers, correspondence, and records to the The liquidators are asking that 91 defendants be held in contempt of court, which could result in criminal penalties, or weekly fines.[69] KPMG had issued written audit reports for CMED from 2003 to 2008, and was replaced by PwC Zhong Tian in August 2009 "Perhaps locking up 91 KPMG partners over Christmas may spur the firms to find a solution to this problem", said Professor Paul Gillis of Peking University's Guanghua School of Management.
In November 2018, the Sultanate of Oman's Capital Market Authority (CMA) suspended KPMG from auditing entities regulated by the CMA for a period of one year after discovering major financial and accounting irregularities in the entities' records.
In 2019 KPMG were fined £5 million by the Financial Reporting Council for misconduct shortly after the takeover of the Britannia Building Society by The Co-operative Bank, particularly relating to the valuation of Britannia's commercial loans and other liabilities. The takeover led to the near collapse of The Co-operative Bank.
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