Dutch social investor Oikocredit, an active funder of seven out of 84 microfinance institutions (MFIs) in Cambodia, has agreed to consult with official bodies after complaints were lodged by Licadho, Equitable Cambodia (EC) and Fian Germany over alleged unethical lending practices.

Oikocredit said in a submission that it supports the decision made by the Organisation for Economic Cooperation and Development (OECD) and National Contact Point (NCP) in the Netherlands.

The submission was based on a complaint made against Oikocredit Ecumenical Development Cooperative Society U.A for funding MFIs despite knowledge of their alleged involvement in predatory lending, coercion and related serious harm since 2017, and also increasing its investment in 2022.

In response to Kiripost’s request for comments, Oikocredit acknowledged that the submission concerns “potential non-compliance with OECD guidelines in relation to Oikocredit's investment approach in Cambodia’s microfinance sector”.

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“The NCP’s acceptance underlines the importance of continued dialogue on client protection and financial inclusion in Cambodia. Both topics are long-standing focuses for Oikocredit,” the email response continued.

“The cooperative welcomes this opportunity for collaborative exchange in support of improving lives through responsible finance in Cambodia.”

‘Keen to learn’

Moving ahead, Oikocredit, which was established more than 50 years ago, mentioned that the NCP’s next course of action involves a consultation period.

Based on similar experiences, it said the NCP indicates that parties concerned typically need about one year to complete the consultation process. After this, the NCP will release a report or statement.

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“While the NCP is not a judicial body, it plays a valuable role as a forum for discussing good business practices. Oikocredit is dedicated to business best practices and keen to learn from the consultation facilitated by the NCP,” it said.

Oikocredit said it has actively participated in sector initiatives to “improve lending practices and financial literacy across Cambodia”.

“Together with like-minded stakeholders, we helped pave the way for mandatory regulation of lending practices in Cambodia, including important measures on client protection,” Oikocredit commented.

“Oikocredit remains engaged with the sector to overcome the challenges of Cambodian microfinance. It is only through perseverance and adaptation that our work can be of value to those who need it most.”

‘Threats and intimidation’

NCP’s acceptance of Licadho, EC and Fian Germany’s complaint comes nearly 10 months after the NGOs lodged the report in December 2022.

According to the NGOs, the NCP is a government-supported grievance mechanism that handles complaints regarding alleged breaches of responsible business conduct and compliance with the OECD Guidelines by Dutch companies.

In their complaint, KB Prasac Bank Plc (formerly an MFI), LOLC (Cambodia) Plc and Amret Plc are alleged to be involved in “threats and intimidation, predatory lending practices, coerced sale of land including land owned by indigenous people, child labour, loss of home and livelihood, forced migration, food insecurity, and termination of children’s education”.

The NGOs also claimed that Oikocredit “raised such concerns or acknowledged them multiple times since 2017”, including in an over-indebtedness report it commissioned to investigate allegations. It was never published.

“Despite this evidence, Oikocredit increased its investments in Cambodian MFIs, rising from 50 million euros ($52.6 million) in 2017 to more than 67 million euros ($70.5 million) as of September 2022 – making Cambodia the country with the second-largest exposure in Oikocredit’s portfolio,” the NGOs said last year.

Empowering the poor

Noting that it has been “wholeheartedly” dedicated to social impact investing since the beginning of its operations, Oikocredit said it has played a “key role in expanding the reach of responsible financial services to those who need them most”.

Its investments have enabled capacity building and other interventions with partners, targeting higher access to finance and resilience for end-clients.

As a social investor, it said its activities are “guided by the principle of empowering people to improve their lives” and is “committed to continue its support of responsible financial inclusion in Cambodia”.

It actively leverages its influence over its partners, seeking to improve their practices in support of empowering people on low incomes to improve their lives.