The Ministry of Economy and Finance has called on all commercial banking and microfinance businesses to reveal the details of privately held trust funds to the government.
An announcement published on November 12 in the Rasmei Kampuchea newspaper states that all finance institutions with trust funds must register their fund’s details with the ministry.
“This Prakas proposes to strengthen the efficiency and govern the effectiveness of the operation of trust funds, and targets developing the banking and microfinance industry in Cambodia,” the statement reads.
Many Cambodian MFIs originate as credit NGOs and are funded by foreign donors via trust funds. The funds come with specific instruction on how the money is to be used for the companies’ operations and have clear objectives such as improving social conditions.
Until now, companies operating a trust fund have not been required to report the details of these funds to any government authority.
Acleda Bank originated as a credit NGO through the financial assistance of a trust fund provided for by foreign donors before becoming Cambodia’s largest commercial banking firm.
In Channy, chief executive officer at Acleda Bank, said the company’s trust fund, named Acleda NGO, had a balance of $46 million at the end of 2013. The bank’s trust fund equates to 1.5 per cent of Acleda’s overall assets balance of $3 billion.
“It is a good prakas. One that we want,” Channy said.
“This prakas is designed to examine the operator who uses the trust fund and to see whether it is used for the original intentions of donors.”
Channy said the ministry’s demands could lead to more trust funds being used to donors’ instruction.
Bun Mony, president of Cambodian Microfinance Association, similarly said the ministry’s call for trust fund details was good in principle.
“We always want to have clear regulations to ensure that whenever we leave our companies, the next leaders will still be able to use this fund lawfully,” he said.
Kang Chandararot, president of the Cambodian Institute for Development Study, called on the ministry to investigate how finance institutions were using their trust funds.
“The ministry should demand the operators to report yearly or every two years on the funds, the funds’ original vision and how that vision is progressing and being implemented,” he said.