In February 2022, CAO received a complaint regarding the practices of six banks or microfinance institutions (MFIs) 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) that were active when the complaint was filed with CAO.

Two nongovernmental organizations (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 indicated that they have acquired loans from one or more of the six institutions mentioned above, alleged 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, additional threats to health, and child labor.

In April 2022, CAO found the complaint eligible and initiated an assessment. In line with 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 was merited. CAO released an Assessment Report in November 2022 in English and Khmer.

On June 13, 2023, CAO concluded its compliance appraisal (available in English and Khmer) 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 were 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 were preliminary indications that IFC may not have 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 were 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.

IFC Request for Board Review

On June 29, 2023, IFC management submitted a request for a Board review of CAO’s decision to investigate (available in English and Khmer). 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 published its Appraisal Report, including the Terms of Reference (available in English and Khmer) for the investigation, IFC’s response to the complaint, and IFC's now withdrawn request for Board review.

CAO Investigation

CAO proceeded with its compliance investigation, finalizing and submitting its Investigation Report (available in English and Khmer) to the IFC Board on October 14, 2025. The investigation found that IFC failed to comply with its Sustainability Framework during both pre-investment due diligence and project supervision of its microfinance investments in Cambodia, contributing to harm to vulnerable borrowers, including Indigenous Peoples.

Specifically, CAO found that IFC’s E&S due diligence was not commensurate with the risks of the sector. Despite known risks of over-indebtedness and social harm, IFC considered impacts on microfinance borrowers to be outside the scope of its E&S policies and obligations. As a result, IFC did not identify borrowers as vulnerable groups under the IFC Sustainability Policy, assess impacts on Indigenous Peoples’ communal land and cultural integrity, or require its clients to apply relevant Performance Standards (PS), good international industry practice (GIIP), and the IFC Exclusion List to their microfinance activities.

During supervision, IFC did not ensure that its clients implemented adequate safeguards or effective grievance mechanisms. While client grievance mechanisms existed, they were not assessed for adequacy, including whether they were timely, accessible, culturally appropriate, or equipped with safeguards against retaliation. IFC also failed to address harmful client practices, including reliance on land collateral, sometimes overlapping with Indigenous land, and aggressive lending and debt collection practices.

As a result, borrowers experienced harm, including loss of land and productive assets, reduced livelihoods, food insecurity, health impacts, disruption of education, and fear and instances of threats and reprisals. Indigenous complainants reported additional harm related to the loss of communal land, affecting their livelihoods, identity, and cultural integrity. CAO concluded that these harms were linked to IFC’s failure to identify, mitigate, and monitor the risks and impacts of microfinance lending, particularly on vulnerable and Indigenous groups.

In accordance with the CAO Policy, CAO developed recommendations for IFC to consider in the development of a Management Action Plan (MAP) relating to the remediation of non-compliance and related harm. Of the seven recommendations, five are project-level recommendations aimed at addressing harms to borrowers and strengthening practices in Cambodia’s microfinance sector. These include: i) facilitating the resolution of affected borrowers’ cases; ii) strengthening sector-wide complaint and mediation systems and regulatory frameworks; iii) enhancing client policies and procedures; iv) expanding training and capacity building on responsible lending and debt collection; and v) improving financial literacy and empowering borrowers to better understand their rights and available grievance mechanisms. In addition, CAO made two institutional recommendations to IFC to strengthen its due diligence and supervision in line with its PS for future investments, including: i) adopting a structured due diligence and supervision process to identify vulnerable groups, assess E&S impacts, and evaluate client capacity to meet GIIP requirements for vulnerable borrowers and Indigenous Peoples; and ii) incorporating into IFC-client legal agreements binding covenants, with reporting obligations, requiring compliance with GIIP for financial inclusion investments.

IFC Management Report

On June 23, 2026, the Board approved IFC’s Management Report in response to CAO’s investigation, which included a set of actions and initiatives. IFC stated in its Management Report that, because it disagrees that the IFC Sustainability Framework applies to the harms presented in CAO’s Investigation Report, it was not presenting a Management Action Plan (MAP) under the CAO Policy.

IFC’s Management Report describes actions intended to facilitate the review and resolution of the 18 complainants’ cases through clients’ consumer complaint mechanisms, supported by an independent consultant, and to strengthen those mechanisms and borrower awareness. IFC also describes actions to enhance responsible lending and debt collection practices through training, client engagement, and updated certification programs for credit officers.

At the microfinance sector level, IFC describes ongoing and planned efforts to strengthen Cambodia’s financial consumer protection framework, including support for regulatory reforms and the Financial Consumer Center (FCC), and for sector-wide complaint and mediation systems. IFC also describes continued collaboration with development partners and authorities, including the United Nations, the Asian Development Bank, Agence Française de Développement, and FMO, to address systemic risks such as over-indebtedness and the use of land as collateral.

On June 24, 2026, the IFC Board released a statement on CAO's investigation report. Per the statement, CAO will monitor IFC’s support to the 18 complainants.

All documents related to this case, including CAO’s Investigation Report and IFC’s Management Report, are available below.