No.8 Interest Rate Cap Policy in Cambodia -Summary of Findings from a Survey and the Policy Implications-

The summary of this policy note is as follows.

■ An interest rate cap policy has been newly introduced to the Cambodian microfinance sector since April 2017.
■ This policy note summarizes the results of a survey, carried out jointly by JICA, CMA and CBC, that investigates the impact of the Cambodian interest rate cap policy.
■ Based on the results of the survey, it can be seen that the outreach of MFIs (Microfinance Institutions) declined due to the implementation of this policy. Specifically, MFIs reduced the availability of costly or high-risk profile loans, such as non-collateral and small-sized loans, which are more likely to be extended to lower-income households.
■ However, the impact is different from MFI to MFI, depending on each one’s original customer segments and operation. Especially large differences were found between deposit-taking MFIs and non-deposit-taking MFIs.
■ To mitigate the negative side effect of the policy, we suggest that the government and the development agencies should consider taking actions such as implementing supporting measures for financial inclusion, addressing regulatory arbitrage, and enhancing the transparency of the microfinance sector.