MFI loans require collateral?
MFI loans require collateral?
I am told that MFI loans are quite popular with Cambodians. Are they required to put up collateral (land title, etc.) to secure these loans or are most of the loans simply signature loans (requiring no collateral). Anybody know?
I got a BIL, who manages two MFI places, and yes you have to show wealth more than the loan. 18% interest, he has obtained a few lovely cars due to 'cannot pay back'' loans.
Last edited by Jep on Thu Jul 04, 2019 1:21 pm, edited 1 time in total.
I read a report that the average MFI loan is “only” about $1600 so I doubt land or any substantial asset would be put up as collateral.
Often loans are taken out in a group of people so a few people are responsible for repayment.
The default rate is incredibly low but taking the above into account it’s not surprising.
There are some who say MFI want people to default so they can take their land/house/Moto but that’s not how financial institutions work. If that was their business model they’d be bankrupt within a year.
They need repeat customers not loads of land that they need to sell.
Often loans are taken out in a group of people so a few people are responsible for repayment.
The default rate is incredibly low but taking the above into account it’s not surprising.
There are some who say MFI want people to default so they can take their land/house/Moto but that’s not how financial institutions work. If that was their business model they’d be bankrupt within a year.
They need repeat customers not loads of land that they need to sell.
pew, pew, pew, pew!
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Hi, I know quite a bit about MFI loans in other countries, but a quick search confirmed that it seems to be the same more or less in Cambodia.YaTingPom wrote: ↑Thu Jul 04, 2019 1:15 pmI read a report that the average MFI loan is “only” about $1600 so I doubt land or any substantial asset would be put up as collateral.
Often loans are taken out in a group of people so a few people are responsible for repayment.
The default rate is incredibly low but taking the above into account it’s not surprising.
There are some who say MFI want people to default so they can take their land/house/Moto but that’s not how financial institutions work. If that was their business model they’d be bankrupt within a year.
They need repeat customers not loads of land that they need to sell.
The companies require a land or property title, usually soft. Some if these companies also own real estate agencies, for fairly obvious reasons.
There is a lot more to be said about the MFI phenomenon, but here is a fairly recent article on Cambodian MFIs.
https://www.voacambodia.com/a/the-debt- ... 05988.html
Some extracts:
According to Borann, an estimated 3 million Cambodians owe money to banks and MFIs, with estimates suggesting eight out of ten Cambodians are in debt.
Besides commercial and specialized banks, Cambodia has more than 70 microfinance institutions and 170 rural credit operators, according to the National Bank of Cambodia (NBC).
Microfinance institutions and credit operators lent a total of $3.9 billion to 1.75 million borrowers by 2017, women making up more than three-quarters of those in debt, according to the NBC.
....
Sophal added that some MFIs had started to charge extra fees to make up for the cap on interest rates.
Rom’s documents showed that she was charged an “administrative fee” every month of $14.
Officials at NBC could not be reached for comment.
Lay Phal, Soung Sang village chief, said out of total 170 families in his village, 90 percent have borrowed money from MFIs and banks.
“She decided to sell her land, a plot of about 100 hectares, for $4,000 and after repaying her loan there was little money left.”
So if they require land titles why did she sell her land, if they already own it, or does she have other land that they owned the title on?
She earns $5 a day but spent over $4k on every items.
Hmm.
Bad debtor or a bad example.
Oh well. They’ll be some cheap land to snap up soon.
So if they require land titles why did she sell her land, if they already own it, or does she have other land that they owned the title on?
She earns $5 a day but spent over $4k on every items.
Hmm.
Bad debtor or a bad example.
Oh well. They’ll be some cheap land to snap up soon.
pew, pew, pew, pew!
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You can't be serious.YaTingPom wrote: ↑Thu Jul 04, 2019 1:15 pmThere are some who say MFI want people to default so they can take their land/house/Moto but that’s not how financial institutions work. If that was their business model they’d be bankrupt within a year.
They need repeat customers not loads of land that they need to sell.
Land worth a minimum of 10,000 vs. a possible repeat customer for $1600?In a country where repeat customer vision is absent?
They are like insurance companies.
There was a thread a while back about MFI's and many foreigners are running these companies or own them. NGOs, MFIs, they go together in developing countries. scobienz et al were very indignant that anybody dare to suggest that MFIs were unethical business practices, iirc.
ירי ילדים והפצצת אזרחים דורש אומץ, כמו גם הטרדה מינית של עובדי ההוראה.
I bet if you ask the inhabitants of no particular town in UK/US/AU how many are in debt the figure will be 100%.
It’s how economies work it seems.
It’s how economies work it seems.
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Average U.S. credit card debt is over $10,000. That’s crazy.
I know one bank in Cambodia that requires post dated checks. The logic is that writing a bad check is punishable by prison, so the check better clear or they can go to jail (with the good repossessed).
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It doesn't really give enough info in that article to tell which.YaTingPom wrote: ↑Thu Jul 04, 2019 9:57 pm“She decided to sell her land, a plot of about 100 hectares, for $4,000 and after repaying her loan there was little money left.”
So if they require land titles why did she sell her land, if they already own it, or does she have other land that they owned the title on?
She earns $5 a day but spent over $4k on every items.
Hmm.
Bad debtor or a bad example.
Oh well. They’ll be some cheap land to snap up soon.
Reading between the lines though, I think she was wise enough to sell the land before she defaulted on the loan and forfeited to the company/ies. Most borrowers take multiple loans out, often so they can repay their other loans.
Another point of interest is the 1% default figure often bandied about the industry. When you look into where this figure comes from, you realise that it's the standard industry figure. The figure is uncheckable, as MFI finances are non transparent. It's likely to be a lot higher.
Maybe.
The west will default way before Cambodia.
The west will default way before Cambodia.
pew, pew, pew, pew!
What became to bank loans here when the war started in the 1970s? I assume all loan records disappeared?
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A perfect example of understatement for purely genius comic effect.
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