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Frequently asked questions

General

Things to know before you get to Cambodia

To make your time in Cambodia enjoyable, safe and rewarding, there are some simple guidelines to abide by and some aspects to be aware of or avoid altogether:

Children

With their cute faces, it can be difficult to say “no” to the local children. You will see them begging in the streets or selling goods outside tourist sites. Don’t give them money or food. When you do, their parents (or ‘guardians’) see it as better than going to school. If you want to give, do it with a well-known, good organisation.

Currency

For anything costing more than $1, you’ll pay in US Dollars. For anything less than $1, you will be given Riel ($1 is equal to about 4000 Riel). With ATMs, you will have the option to choose USD or Riel. Choose USD as it’s widely accepted, easier to understand when converting, plus you will have fewer notes in your pocket.

Be careful with the condition of the notes as, if you get one with a rip or tear in it, locals won’t accept it (especially larger values). If you stay calm and say you have no other bills, they will probably take it… but best to avoid this situation!

Language

It will be useful to learn some basic phrases in Khmer, such as:

  • Hello – Sou sdey (Sounds like ‘Sewer Suday’)
  • Thank you – Ah Kun (Sounds like ‘Or Kun’)
  • Sorry – Sohm tou (Sounds like ‘Som Toe’)
  • No thank you – Ateh Ah Kun (Sounds like ‘Attey Or Kun’)

Elephants

Never ride an elephant; they suffer terribly as they are ‘broken in’ for you to ride. If you do, you are legitimizing the mistreatment of animals.

Tap water

It’s probably better to avoid drinking tap water and use bottled water instead if you are in Cambodia for a short time. It probably won’t kill you but might give you diarrhoea. When you do buy water, get large bottles. You can buy 20 litre bottles for around $1 (which can be delivered and the empties picked up). Avoid small plastic bottles and bags when possible, as plastic is one of the biggest environmental problems in Cambodia.

Tuk Tuks, MotoDops and PassApp

Getting around easy and enjoyable by Tuk Tuk, but take a business card or written address, so you know where to go and be prepared to barter. The cheaper option is to download the ‘PassApp’, which is about half the cost of a Tuk Tuk and is a fixed price. ‘MotoDop’ (on the back of a motorbike) is good when you are in a hurry (plus very cheap), but they usually do not have a helmet for you.

Baby scams

A young woman may approach you holding a sleepy baby in her arms saying she is hungry and needs food (‘nambai’ or rice). This can be a trap as you may be hit with a large bill at the end of the meal. In many cases, the restaurant and woman split the profit. You may also be approached by a woman with an infant, telling you she needs milk formula. She may take you to a nearby shop and pay $20 – $30 for a tin. Later she returns the tin and the profits are split between the store and the woman. Be prepared to say no and walk away calmly.

You will need a visa

On entering Cambodia, you will need a Visa which is best done before you arrive as an e-visa (go to: https://www.evisa.gov.kh/). If you don’t have one, you get it when you arrive. It costs $30 for a tourist Visa and takes around 5-10 minutes. Make sure you have a spare passport photo with you. Here is some more information.

English is widely spoken

If you don’t speak Khmer, don’t worry… English is widely spoken in Cambodia and you will have no trouble getting around, ordering food or communicating with vendors.

Monks

In Cambodia, monks are highly respected and you are expected to do the same, especially women. Do not touch or sit too close to a monk and always ask before taking a photo of or with him.

Bag snatching

Don’t carry your valuables in your bag hanging off your shoulder. When you do go out, put your backpack on with any straps around your middle, making sure the zips are secure. In crowded places, put it on the front of your body. Be careful in Tuk Tuks too… thieves sometimes run up or drive past and rip your bag away. Also… don’t stand on street with your phone or wallet in your hand – keep them out of sight. Taking selfies is a great opportunity for thieves too… so be careful!

 Sunglasses and face masks

When driving, pollution, dust and grit can get into your eyes, nose and mouth – use a face mask (or ‘krama’ – scarf) and sunglasses.

SIM cards

When you arrive at an airport, you’ll many vendors outside selling SIM cards, which cost around $3 (2GB of data for 7 days). This means you can immediately start looking up good restaurants using Google Maps.

Temples

When visiting temples or other official places, women especially must cover their shoulders and knees.

Angkor Wat

You will need a temple pass (Angkor Pass) to access Angkor Wat and other temples around the place, which you can buy from a processing centre on the road to Angkor Wat. As of 1.2.2017, prices have increased to one-day ($37), three-day ($62) and seven-day ($72). Keep your pass safe, as you need to have it with you at all times. If you lose it, you will have to buy another. For more information, go to: https://www.visit-angkor.org/

Internet services

Contact our office for an overview of what’s on offer. There are often specials too… so just ask!

Umbrellas

When it’s not raining, the sun will burn. Take a small umbrella wherever you go… you will thank me!

High season

Pre-plan between November and March (and the main holidays) as you won’t want be without a bed in Cambodia!

Heat and humidity

Get up early, drink lots of water, wear sunscreen, avoid the midday sun and wear light, breathable clothing.

Sanitiser

When you use the WC, there may not be toilet paper, a basin or soap. Take sanitiser and tissues with you.

Mosquitos

Take heavy duty spray and use it. Dengue Fever is something to be avoided, not to mention Malaria and Typhoid.

The people

Despite experiencing some fairly recent atrocities, they are delightful people. If you smile, they will smile back.

What to wear

  • Pack light, breathable, loose clothing – consider vests/singlet tops as well as t-shirts too
  • Take comfortable footwear – sneakers, flats and sandals
  • Bring a hat, sunglasses, sunscreen and umbrella
  • Take two ‘temple outfits’ that cover your knees and shoulders
  • Pack a few ‘nice’ outfits for special dinners or nights out, high-hells are not required

Other things to take

Charge station: Buy a power point converter and take a power board with multiple plug-ins.

Hair products: Pack strong hair ties and hair spray – the humidity will mess any hairstyle.

Medicine: Take a small bag of cold and flu tablets, hay fever/allergy medicine, Ibuprofen, Paracetamol, Buscopan and Imodium. People suffering hay fever, asthma or allergies may find the pollution makes things worse. Don’t forget any prescription medicines or special medications.

Essentials: Take what you love – creams, colognes, perfumes, toothbrush heads and hygiene products, eco-friendly products and products for sensitive skin… it may be difficult to get them in Cambodia. Don’t waste money on travel minis, use refillable 100ml bottles instead!

Daypack: Take a good, comfortable day pack that fits your essentials (camera, wallet, snacks etc.) that is comfortable and doesn’t give you a sore neck.

Plastic bags: Take some large plastic bags and small sandwich bags in your luggage, they come in so very handy for storing dirty shoes and clothes as well as bars of soap, wet swimwear or leaky bottles.

Tupperware: Tupperware (or similar) are good for toiletries and ensure no leaks will destroy clothes and makes it really easy to grab toiletries quickly, keeps them together and makes re-packing easier. Small containers are good for jewelry and electronic bits (adaptors, cords and chargers).

Laundry bag: Pack a laundry bag to keep track of what’s clean and what isn’t.

Air freshener: Put some in your luggage to keep everything smelling good.

Local currency: Take a small amount to cover the first few days and make sure you informed your own bank you are away so they don’t freeze your account.

Good areas in Phnom Penh for expats:

  • Riverside (Daun Penh)
  • Koh Pich / Diamond Island
  • Chamkarmon – BKK1 / BKK2 / BKK3 / Toul Tom Pom (Russian Market)
  • Olympic Stadium / 7 Makara (Orussey Market area)

Websites for important contacts (Doctors, Dentists, Police, Supermarkets, Night spots):

Last advice:

If you end up living in Phnom Penh, we suggest you get out as much as you can. The city can suck you in and time passes quickly with cheap and available beer. The provinces and their people are amazing and will give you wonderful memories to carry with you the rest of your life.

How to check Cambodian phone numbers by prefix

Why? Because, if you don’t, you could end up with a large phone bill. When possible, call the same service as your own… you may have to get another SIM card to enable this.

Usually Cellcard and Smart are all you’ll need.

Cellcard: https://www.cellcard.com.kh/en/
011, 012, 014, 017, 061, 076, 077, 078, 085, 089, 092, 095, 099
➢ Check number: press 1# and 📞 or press 2# and 📞 or press *3# and 📞
➢ Check balance: #124# and 📞.

Smart: https://www.smart.com.kh/
010, 015, 016, 069, 070, 081, 086, 087, 093, 096, 098.
➢ Check number: press 2# and 📞 or press *887# and 📞 or press *400# and 📞
➢ Check balance: *888# and📞

Metfone: https://metfone.com.kh/en
088, 097, 071, 031, 060, 066, 067, 068, 088, 090, 097
➢ Check number: press 88# and 📞 or press 99# and 📞 *097# and 📞

QB: http://www.qbmore.com/index.php/en/
013, 080, 083, 084
➢ Check number: press #3# and 📞 or press *132# and 📞 or #132# and 📞

SEATEL: https://www.yes.com.kh/
018
➢ Check number by sending SMS 106 send to 1800
➢ Check the balance by sending SMS 101 send to 1800.

Cootel: http://cootel.com.kh/?lang=en
038
➢ Check number by Go to your phone Menu -> Accounts -> Subscriber No. -> OK
➢ Check balance by Go to Menu -> Coo Bill -> Balance.

Real Estate

Cambodian property taxes: tips for buyers and renters

Being a property owner, seller or buyer in Cambodia you will need some reasonable knowledge to help you understand your obligations and respond accordingly. For those who sell or lease real estate and other properties, it is important to know the property tax basics in order to make informed decisions. The same applies to buyers or investors, who should have a working knowledge of laws and regulations governing property transfer, sale, lease, etc., to make sound decisions.

Below are important information on the property taxes applicable in Cambodia, thanks to Realestate.com.kh

What is Property Tax?

This tax is paid annually for immovable properties (land, apartment, etc.) and needs to be filed and paid by September 30th. The first step is to register at the tax branch where the property is located and complete the PT01 and PT02 forms. PT01 provides information about the property. PT02 is the tax application form. When registering, take original documentation attesting to your identification property ownership (e.g. birth certificate, passport, certificate of ownership). Property Tax is 0.1% of the property value, determined by the Immovable Property Assessment Committee. Calculation is based on several factors including location, materials and government data. Owners pay this tax if the value of property is >$25,000 US and is now strictly enforced. Agricultural land, state land, and industrial locations are exempted.

Things you need to know about the Transfer Tax

Buyers are responsible for paying this tax which is also known as stamp duty. It is payable on completion of a sales transaction. This tax is calculated as 4% of the property value. The actual tax levied is computed through government valuation or actual transaction price. In practice, the two valuation methods are often not applied, relying instead on the negotiated price between buyers and sellers.

Where does the Withholding Tax apply?

This tax applies to property rentals. Businesses, for example, renting office space, must pay 10% Withholding Tax on the rent. The landlord is responsible for withholding this and the lessee acts as the withholding agent and pays the obligation on his tax return. When buying condos, you must pay 10% VAT, except for the land where the property stands. The same applies if the lessor is a registered taxpayer. If the lessee is a registered taxpayer, a 10% Withholding Tax is deducted.

Who Pays Rental Tax/Income Tax?

Locals and foreigners who own and rent out properties must pay Rental / Income Tax annually. A foreign investor who buys property and rents it out pays 14% of the gross rate. For locals, the rate is 10%. If you want more reliable information regarding taxation, we recommend you obtain independent legal or professional advice to ensure certainty and clarity.

For more information go to: www.realestate.com.kh/news/Cambodia-Property-Taxes-Important-tips-for-buyers-and-renters/

Can foreigners buy real estate in Cambodia?

To stimulate the economy and encourage investment, the Cambodian government created laws on foreign ownership in co-owned buildings.

The main conditions are that:

➢ Foreigners cannot own ground floor properties, sub-soil or common areas.
➢ Foreign ownership of private units must be <70% of the entire block.
➢ This does not apply to properties <30km of national borders, Special Economic Zones or important urban areas.

There are essentially five options for buying properties in Cambodia:

Option 1: Forming a company to invest in property which must have >50% Cambodian ownership.

Option 2: Getting honorary Cambodian citizenship. A foreigner can obtain Cambodian citizenship if s/he donates ‘significantly’ to benefit Cambodian people. Those granted citizenship can acquire right of ownership of property purchased in Cambodia.

Option 3: Buy and register property in a Cambodian’s name. To avoid this individual from selling the property without informing the owner, the foreigner is advised to hold the title deed.

Option 4: Foreigners can purchase property (Option 3) and enter into a long-term rental agreement with a Cambodian (<99 years).

Option 5: A foreigner married to a Cambodian can register a property using their spouse’s name.

Land title transfer process in Cambodia

Step One:

The buyer verifies the title certificate with the Land Office and checks for potential liens (debt) and/or other encumbrances. S/he must obtain a copy of the initial title certificate from the seller and verify that the seller is the rightful owner of the title certificate. This is also verified with the land office to ensure that there are no liens, mortgages, disputes or other encumbrances for that property.

Estimated time: 10 days (simultaneous to steps 2 and 3)

Official cost: (according to Ministry of Land Management, Urban Planning and Construction Prakas 995 dated 28/12/2012) = KHR 50,000 / US$12.50

Step 2:

The Buyer must contact the relevant village chief or commune council official to obtain information on the land and undertake an official search of the title at the municipal land office.

Estimated time: 10 days (simultaneous to steps 1 and 3)

Official cost: Nil

Step 3:

Buyer obtain the certificate of incorporation of the seller’s company and other official documents from the seller (e.g. ID of the shareholder, or person acting on behalf of the company, a certified/notarized copy of the certificate as issued by the Ministry of Commerce). These are needed to verify the accuracy and identity of the company name appearing on the title certificate. A Power of Attorney is also needed, and a resolution signed by the company’s Board of Directors, authorizing the named individual to represent the company at the land office with a Power of Attorney implementing that Resolution.

Estimated time: 10 days (simultaneous to steps 1 and 2)

Official cost: KHR 80,000/US$20.00

Step 4:

Apply for registration at the District Land Office of the Ministry of Land Management, Urban Planning & Construction (MLMUPC).

When 2 persons/companies wish to buy/sell real property, they must first go together to the district office of the Ministry of Land Management, Urban Planning & Construction (MLMUPC) and arrange to prepare and sign documents. The documentation needed includes the company’s statute, its Certificate of Incorporation, and Power of Attorney (obtained in Step 3). At the same time, the original Title Certificate held by the seller must be presented to the Khan at the time of signing the deed, in order to have the name of the new owner officially inserted on the document.

Relevant Government Agency: District Land Office, MLMUPC (District Land Office of the Ministry of Land Management, Urban Planning & Construction)

Estimated time: 20 – 30 days

Official cost: A transfer fee of KHR 600,000 is paid to MLMUPC.

Step 5:

Pay 4% of the total value of the property to the Ministry of Economy and Finance at the Tax Collection Office, relevant to the location of the property. A receipt is issued to prove payment.

In Phnom Penh, this tax is assessed on a schedule of property value determined by the Municipality. This is usually based on size, location, use, potential use, etc. of the property. If the land is more than 1200sqm, the surplus of the land will also be subject to “unused land tax”.

Estimated time: 1 day (depending on location and size of property)

Official cost: 4% of property value (transfer fee)

Step 6:

After all taxes are paid, the parties may return to the cadastral office at the MLMUPC and sign/thumbprint a MLMUPC form for buying/selling real property, as filled in by MLMUPC official. The signing/thumb printing must be witnessed by a local authority such as commune chief, who will also thumbprint. The documentation provided should include payment receipts of transfer tax (obtained in Step 5).

Estimated time: 5 days

Official cost: Cadastral service fee paid in Step 4

Step 7:

The Khan/District land office forwards all the transfer documents to the Municipal Land Office where it issues the final Certificate of Title in the new owner’s name. It is now registered.

Estimated time: 1 to 2 weeks (depending on the diligence of officials and interested parties)

Source

Purchase of a property by foreigners in Cambodia with Freer Properties

Purpose: to provide a framework to allow foreigners to legitimately purchase, improve and maintain soft and hard titled properties in Cambodia.

Overview

  • Background – laws in Cambodia
  • Background – Freer Properties
  • Liability / Indemnity / Service Agreement
  • Shareholder Agreement
  • Costs (set up and ongoing)
  • Other services (construction / maintenance / AirBnB / property management)

Background – Cambodia law

Five options for foreigners to buy property in Cambodia:

  1. Forming a Company in Cambodia with a Cambodian Citizen (>50% Cambodian shareholding)
  2. Obtaining Cambodian citizenship via investment in Cambodia or by marriage
  3. Buy property with a Cambodian citizen’s name and puitting protective measures in place (such as hypothee or long term lease)
  4. Long term rental
  5. Purchase of strata-titled / condo property

The Cambodian government unveiled new ownership laws in co-owned buildings in 2010:

  • Foreigners cannot own ground floor properties
  • Total foreign ownership of private units must not exceed 70%
  • Does not apply to properties <30km of national borders (some exceptions e.g. SEZ)

Background – Freer Properties

Freer Properties, established in May 2018 (ex-Yong Yap) is a Khmer-owned fresh company focused on offering quality property sales, letting and management in Phnom Penh and beyond.

  • Free valuations (ensuring each property is marketed right first time, every time)
  • Basic legal advice and referral (to help clients work with challenging foreign ownership laws)
  • Property management, construction, maintenance and AirBnB
  • Advice and information to help newcomers explore Phnom Penh safely and meaningfully

We understand selling, renting and managing property is more than knowing a budget and scrolling a database. We know it’s an important decision and take pride in understanding our clients’ needs, explore all possible options and cross-match the right property.

Service Agreement

A ‘Service Agreement’ would cover the holding of shares to enable property ownership / control:

  • Real Estate / Investment strategy services
  • Includes an upfront (non-refundable) payment
  • Built-in checking mechanism for payment of taxes and other legal obligations
  • Contract is automatically ceased if non-payment
  • Property is purchased under ‘Freer Holdings’ which is shared with buyer
  • Unanimous agreement of all shareholders is required to sell or modify the property

Shareholder Agreement

  • Company is established to enable shareholding structure (approx. cost $2,500)
  • Monthly tax-filing services
  • Land tax is a company liability (0.01%)
  • A mortgage could be established by a foreigner on the property (condos only)
  • The property would be owned 51% by the holding company / 49% by foreign owner
  • 100% shareholder resolution is required to sell / modify property

Moving house - Freer Properties checklist

Moving house? You might need a checklist!

Moving house can be a daunting task. Not only is it an emotional journey, but you’ll have reams of admin to do.

Here’s a list to help you tick off the boxes!

Change your address
  • Start doing this 30 day before the move. Sometimes a phone call will do, but often you may have to fax proof of the new address to certain institutions or go into the bank, your doctor, kid’s school or Sangkat to fill in forms, so giving yourself a head-start will help to shorten your to-do list.
  • In some cases you may have the option to receive statements and accounts by email – this not only cuts down on paper wastage, but ensures an easier change of address process.

Here’s some institutions you should notify, plus a few extra things to keep in mind.

Utilities and bills:
  • Water and electricity: Make sure you get and pay your last bill at the old residence (if you are moving altogether) and fill in the necessary forms to transfer the account so you won’t be held liable for new bills. At your new residence, check that the account is paid up by the previous owner/tenant and transfer the account into your name.
  • Phone / ISP / Cable TV provider: Arrange for your accounts to be transferred to your new address on the day of the move so you’re connected immediately.
  • Insurance: Change your address for household insurance for the exact day of move. Many burglaries occurs in the first week after a move, so you want to be insured. If the moving company also offers insurance for your good in transit, weigh up the cost and risk involved.
Finance:
  • Bank: Let your bank know – you may have to transfer bank branches and get a new sort code as well. Also remember to inform other institutions with whom you may hold mortgages, short-term loans, student loans, additional savings or credit cards.
  • Policies: If you hold retirement annuities, life and disability insurance, funeral cover or other annuity policies, inform those institutions as well.
  • Store and loyalty cards: Ask to receive your statements at your new address.
Health:
  • GP, paediatrician, dentist, vet: These healthcare practitioners need to know to send your bills and reminders to your new address, and have your new address on record in case of an emergency.
  • Medical aid: Your medical aid or hospital plan needs to be informed too.
  • Gym membership.
Work and business:
  • Your employer (and your clients if you work from home).
  • Post office: Inform the Post Office and set up re-direction of your mail (if possible)
  • Postal address: If you have a PO BOX address, remember to move your account or close it.
Entertainment, leisure and social:
  • Newspaper and magazine subscriptions.
  • Clubs, including your children’s activity groups – sport, gym, hobbies, etc.
Family and household:
  • Have you informed relatives and friends?
  • Staff: make sure your nanny/cleaner/gardener know how to get to your new address – it may require new routes and a hike in fares, so check with them in advance.
  • Your child’s nursery, crèche or playschool needs to know in case of emergencies.
  • Pets: Are pets allowed in your new residence?
  • Private nurse, night nurse or your midwife.
Before the move:
  • Movers: If you’re planning to use a professional mover, book one well in advance. Many will offer to pack up your house for you at an additional cost, or supply you with boxes in advance, and even offer optional insurance covering the move from house to house. Consider your options: You could perhaps ask them to pack your kitchen breakables and other fragile items, as many movers won’t accept responsibility for breakages if you packed these yourself. Always read the terms and conditions carefully.
  • Painting and renovations: If you’d like to paint the house or do certain alterations, it’s a good idea to do this before taking occupation of your house. It’ll go a lot quicker if the house is empty, and you won’t have to worry about dust and fumes. If there are wood beetles in the floors, cupboards or skirting boards (especially coastal areas) you should also fumigate the house now.
  • Cleaner: If you’d like someone to help you clean your old and new houses, book some help.
  • Clean out: Start going through cupboards and throw out anything you don’t need or want so you can start with a clean slate in the new house (and have less packing to do later). Divide these up into recycling and charity piles.
  • Get measurements at the new house: This will help you decide whether to move your curtains and blinds over or to have new ones made, and help you plan where to place heavy furniture, such as pianos, which can’t easily be moved again later.
  • Dry-clean and steam clean: Dry-clean or wash your curtains, and steam clean your upholstery.
  • Dispose of unwanted furniture or appliances and make sure whomever is taking them collects them before the move.
  • Return all borrowed items.
  • Make a list of your items you need to retrieve: Dry-cleaning, items you’ve lent out, sports equipment stored at schools, etc.

When packing:

  • Get cardboard boxes and packing tape: The movers may be able to supply boxes and you could also ask your local supermarket or book dealer for boxes.
  • Start packing early: It always takes longer than you think. Send your children away for the day or weekend to enable you to work quicker.
  • Tighten the lids on all jars.
  • Wrap your breakables with bubble wrap or newspaper and fill any gaps in the boxes with pillows or books. Boxes are often stacked and boxes that aren’t filled to the top will collapse and tear under heavy weight.
  • Don’t make any box too heavy to carry. Half-fill a box with books and top up with light items.
  • Mark each box with a number and its destination room (kitchen/study) and then make notes of what goes in which boxes so it’s easy to find: often-used items like your hair drier or bedding on the other side.
On the day of the move
  • Put aside valuable items, money, documents.
  • Defrost your refrigerator.
  • Take down and dismantle the television/DSTV aerial.
  • Disconnect the stove (if you’re moving it with you).
  • Clean the house properly, in every nook and cranny.
  • Do a last check: are all rooms, garages, outhouses and tree-houses empty?
  • Are all taps closed?
  • Is the gas turned off?
  • Are the windows and doors secured?
  • Leave all sets of keys for the new occupant and if necessary, request that your post be forwarded to your new address.
  • Say goodbye to the neighbours as you embark on a new journey to a new home.

Banking Services

Getting a bank loan in Cambodia

In many countries, having a steady job with a good income means you can borrow from a bank. This is not the case in Cambodia, where you can only get a loan if you have a land title. Banks refer to a land title as collateral, which cannot be a movable object, like a car, boat or a motorcycle.
According to Sanrith Puthya, a senior loan officer at Canadia Bank, “Our bank needs a land title. If you don’t have it, we cannot provide a loan for you… I think all the banks (in Cambodia) are the same.”

“… It comes down to fear of the borrower not paying the loan back in full due to current weakness in Cambodia’s laws”, explained Lun Bouna, a credit officer at Cambodian Public Bank. “In America, the government can control their people, but in Cambodia, if you don’t pay, you (can) run and we may not be able to find you,” he said.
The same policy is also enforced at Acleda Bank, Foreign Trade Bank, Cathay United Bank and Mekong Bank which means that, for small business owners or entrepreneurs, this leaves little choice for obtaining loans.

“There are very few Cambodian banks willing to lend to start-up companies with less than a three-year track record of being a profitable business,” says Anthony Galliano, an American banker who now has an investment management company in Cambodia. Part of the problem, he added, is that businesses in Cambodia have poor accounting practices and are not audited – so banks can’t rely on their financial records while making loans.

Microfinance loans

Microfinance institutions provide some loans without requiring a land title (usually only formal ID is needed), but these loans are generally very small and interest rates high. They also need to be paid back quickly, such as one year. Amret Microfinance, for instance, only makes small loans (<$500 per person). Interest rates range from 1.9 – 2.2% / month and the entire loan needs to be repaid within 12 months.

“Aeon Microfinance lends between $100 and $3,000, depending on the borrower’s income with an interest rate of 2.9% / month”, said Puth Leakena, an employee at Aeon Microfinance. In most cases, a borrower can get a loan of about twice their monthly salary, Ms. Leakena said, however foreigners cannot borrow from Aeon at all.
“These interest rates are very high, compared to rates in other countries”, agrees Mr. Galliano. “Twenty-four percent per year, that’s crazy,” he said, “The rates in the U.S. are pretty low – 3 – 6% per year”.

Inflation in Cambodia was 2.9% last year according to https://tradingeconomics.com/cambodia/inflation-cpi

Short-Term Loans

Even for customers with land titles, banks are unwilling to lend for long periods of time. Most loans in Cambodia are repayable within five years, Mr. Galliano said, compared to the USA, where mortgages can span decades.

The unwillingness to lend for extended periods affects long-term projects, Mr. Galliano said and because of this, businesses turn to equity (partner investment) rather than debt for financing. “In other economies you see debt financing, but here there is a much larger component of equity because it’s harder to get long term loans”, he said.

But even though equity funding is not easy to obtain, especially for SMEs, the banking sector has been making some positive moves. The country’s first credit bureau was established a few years ago, meaning that banks can now report on non-repayment of debt and avoid future lending to borrowers who have previously defaulted. “If you default on a loan, you’re going to get reported,” Galliano said. “You can also go after someone in court if they don’t pay”. However, Cambodian banks rely more on local peoples’ fear of ‘losing face’ or reputation, he added.

Some exceptions

Nonetheless, there are a few special cases making it possible to borrow from a bank without a title, such as:

➢ At Canadia Bank, which has a construction partner, a borrower can get a loan without a land title if s/he purchases a condominium or an apartment through the company’s housing project, according to housing loan officer Chhean Chankhyra.

➢ Cambodian Public Bank has previously loaned money using company assets – such as rice mill machinery – as collateral, said credit officer Lun Bouna. Galliano noted that a taxi company once obtained a loan from ABA using its taxi cabs as collateral.

➢ Foreign Trade Bank can lend against a borrower’s fixed deposit as collateral. If the customer has a savings account in the bank but does not wish to withdraw money and lose the interest, the bank can make a loan, as long as the amount loaned is less than what the customer already has in his or her savings account, said loan officer Meng Sengkry.

➢ Aeon Microfinance has a group loan program, where a group of as many as six borrowers can obtain a larger loan together, noting that each individual borrower’s loan cannot exceed $500.

For more, please go to: http://www.khmertimeskh.com/news/6963/in-cambodia–you-cannot-get-a-loan-from-abank-without-a-land-title/