T&S View: cash-flow lending has promise, but rate caps and low account access constrain it

Facts

This article is T&S's view. We set out the facts first.

On 24 June 2026 the IFC Board concluded that IFC had not breached its environmental and social policies, in response to the investigation report by the CAO (IFC's independent accountability mechanism) on IFC investments in six Cambodian MFIs. It approved an action plan that includes support such as loan restructuring for the 18 complainants, support for establishing a financial ombudsman, and improved responsible-lending certification for about 65,000 loan officers ¹. Human Rights Watch (June 2026; the URL is dated 2026-06-26) criticised the decision, noting that IFC had invested over USD 400m over a decade in Cambodian MFIs.

The NBC–UN plan had completed 10 of 22 actions as of September 2025, with responsible pricing and data sharing outstanding (see separate article).

According to the World Bank Global Findex, adult account ownership was 39.0% in 2024 (up from 33.4% in 2021) ². ILO estimates put wage and salaried workers at 44.5% of total employment in 2025 ³.

Analysis

T&S expects lenders increasingly to be asked to explain how they verified repayment capacity rather than what collateral they took. Starting small on the basis of payroll and account-flow history, and extending limits as repayment history builds, can extend credit while avoiding over-indebtedness.

Three constraints, however, weaken this view.

a) Rate cap and unit economics. The NBC Prakas on Interest Rate Ceiling on Loan (13 March 2017) remains in the published legislation list. The Prakas sets the cap at 18% a year for any loan maturity; it applies to MDIs, MFIs and rural credit operators, for new loan contracts (including restructured and refinanced loans) from 1 April 2017, and its text does not mention fees ⁴. As an illustration, assume that level (excluding fees), equal instalments, a funding cost of 7% a year, underwriting cost of USD 5 per loan (identity checks, bureau enquiry and assessment), collection and servicing cost of USD 4 per loan and an expected loss of 3% of principal, excluding head-office overheads. For a loan of USD 300 over six months, interest income is about USD 15.9. Against it stand the funding cost of USD 6.2 and per-loan costs of USD 18: underwriting USD 5, collection USD 4 and expected loss USD 9. The result is about −USD 8.3 per loan (interest income minus funding cost minus per-loan costs) ⁵. At USD 300 over twelve months the loan roughly breaks even (about +USD 0.4); at USD 500 over twelve months it earns about +USD 6.6; and at USD 300 over twelve months with expected loss cut to 1% it earns about +USD 6.4. These are illustrative assumptions, not observed data. Small, short-tenor lending under the cap works only if automation cuts fixed costs and losses stay low.

b) Reach of underwriting data. Account ownership is 39.0%, and most of the employed are not wage earners. The share of workers paid into an account could not be confirmed in primary sources (unverified). The NBC semi-annual report counts 39.6 million deposit accounts and 4.7 million loan accounts in June 2026, but individuals hold multiple accounts, so account counts do not measure people. The population reachable by cash-flow underwriting is limited to a subset of wage earners.

c) Industry and supervisor counterarguments. The IFC Board did not find a policy breach. CMA reports that its members restructured USD 500m of loans for displaced households between mid- and end-2025 and waived USD 10.6m in interest (16 January 2026) ⁶. The Association of Banks in Cambodia (ABC) and CMA said in a joint statement on 16 March 2026 that sector soundness indicators exceed regulatory requirements. The NBC received 721 complaints and enquiries in 2025, of which 683 were resolved. Any judgement should weigh these industry and supervisor positions, not only NGO criticism.

Implications

Counterpoints and uncertainties

With the payroll-deposit share unconfirmed, the size of the reachable population is uncertain. How the IFC Board's decision will affect development-finance flows and terms is unclear. The timing of data-sharing and DTI rules is also unknown. The NBC Annual Report 2025 says the NBC is preparing and reviewing Prakas and guidelines on interest rate ceilings, so the cap and its treatment of fees could change.