In February 2022, CAO received a complaint regarding the practices of six banks or microfinance institutions in Cambodia (ACLEDA, Amret, Prasac, Hattha Bank, LOLC and Sathapana) and four financial intermediaries that invest in those banks or MFIs (Microfinance Enhancement Facility (MEF), Microfinance Initiative for Asia Debt Fund (MIFA), Advans S.A. and North Haven Thai Private Equity Fund L.P.). These banks are linked to 13 IFC projects supporting lending programs for micro, small and medium enterprises (MSMEs) and that were active when the complaint was filed with CAO.

Two NGOs filed the complaint—the Cambodian League for the Promotion and Defense of Human Rights (LICADHO) and Equitable Cambodia (EC)—on behalf of the complainants in Cambodia. The complainants, who indicate that they have acquired loans from one or more of the six institutions mentioned above, allege that they have been harmed by predatory and deceptive lending practices, including threatening collection actions, purportedly committed by these institutions. Concerns raised in the complaint include loss of land, loss of livelihood, food insecurity and additional threats to health, and child labor.

In April 2022, CAO found the complaint eligible and initiated an assessment. In line with the CAO policy, the assessment period was extended until September 27, 2022 as some parties expressed interest in engaging in dispute resolution. However, a consensus was not ultimately reached, and CAO transferred the complaint to its Compliance function for appraisal to determine whether an investigation in relation to the issues is merited. CAO released an assessment report in November 2022 in English and Khmer, which is available in the “Case Documents” section below.

On June 13, 2023, CAO concluded its compliance appraisal with a decision to initiate a compliance investigation in response to the complaint. 

CAO concluded that IFC’s direct and indirect investments in the six financial institutions—Acleda, Amret, Hattha Bank, Prasac, LOLC, and Sathapana, met the criteria for a compliance investigation because: a. there are preliminary indications of harm regarding the allegations of adverse impacts of microfinance lending raised by complainants, including loss of land, livelihood impacts, impacts on Indigenous Peoples, and threats and reprisals; b. there are preliminary indications that IFC may have not complied with its environmental and social (E&S) policies, specifically its responsibility to carry out E&S due diligence and ongoing supervision of these investments’ social impacts on microfinance borrowers based on the requirements of the Sustainability Framework; and c. the alleged harms to the complainants are plausibly linked to IFC’s potential non-compliances, because they could plausibly have been prevented, mitigated or otherwise addressed had the social risks and impacts associated with the clients' and sub-clients’ lending and collection practices been identified by IFC in its E&S due diligence and supervision.

On June 29, 2023, IFC management submitted a request for a Board review of CAO’s decision to investigate. Following the CAO Policy (para. 107-111), the Board had 10 working days to consider IFC’s request for review of CAO’s decision. On July 14, 2023, the Board extended the review period to July 28, 2023.

On July 28, 2023, IFC withdrew its request for a Board review of CAO's decision to investigate. Following the CAO Policy, CAO has published its appraisal report, including the Terms of Reference for the investigation and IFC’s response to the complaint, as well as IFC's now withdrawn request for Board review.