World Bank’s IFC Dismisses Ombudsman’s Findings on Cambodia’s Microfinance Sector
Human Rights Watch has stated that the World Bank’s International Finance Corporation (IFC) has rejected findings from an ombudsman concerning damages tied to investments in Cambodia’s microfinance sector. This rejection, noted on June 24, 2026, represents a significant failure in accountability.
Elaine Pearson, the Asia director at Human Rights Watch, commented that the decision undermines accountability for both the microfinance sector and its borrowers in Cambodia, many of whom are burdened with significant debt. “IFC should stop avoiding its responsibilities and take steps to address past harms and prevent future issues,” she added.
In response to a complaint lodged in 2022 by 18 microfinance borrowers in Cambodia, the Board of Directors of the IFC stated that it would initiate a plan allowing complainants to utilize existing grievance mechanisms in the country. Their announcement indicated no violations of the IFC’s policies regarding environmental and social sustainability.
The Compliance Advisor Ombudsman (CAO) released its report on June 24, which examined the allegations in the 2022 complaint. This extensive report outlined significant harm directly related to several areas in which the IFC did not comply with its policies, including failing to protect vulnerable populations and ensure adequate grievance mechanisms were in place.
Cambodia currently faces the highest per capita microcredit debt globally, with predatory lending practices leading to severe consequences, such as forced land sales, starvation, disruptions to education, and various labor abuses, including the coercive sale of land.
Indigenous communities are especially affected, with many having limited literacy in Khmer. A report from September 2025 by Human Rights Watch highlighted the alarming trend of microfinance institutions, bolstered by international investors, aggressively marketing loans within these communities.
The Ombudsman found that the IFC’s failures to adhere to its performance standards resulted in similar harms experienced by indigenous groups. There were significant risks identified that common lands might be accepted as collateral without community consent, leading to detrimental impacts on their access to resources and culture.
Additionally, the report indicated that the IFC did not adequately apply its sustainability policies to evaluate environmental and social repercussions for indigenous peoples and failed to establish relevant mitigation measures for the microfinance providers involved.
Despite IFC’s unprecedented investments in Cambodia—amounting to over 400 million dollars—the Ombudsman expressed concern over the lack of thorough due diligence regarding potential impacts on indigenous regions. The report highlighted a troubling reliance on clients’ self-declarations, rather than independent verification.
Human Rights Watch had previously raised alarms about rampant debt and predatory practices within Cambodia’s microfinance system in 2020 and 2025. In a July 2025 correspondence, IFC management attempted to distance itself from allegations of harm to borrowers, arguing against the Ombudsman’s restrictive interpretation of its policies.
Both Cambodian organizations and Human Rights Watch have pushed for independent rescue processes for the microfinance sector. Such a process would ideally create an impartial grievance mechanism to address borrower issues like compensation, debt relief, and land restitution.
However, the IFC’s proposed plans lack these crucial commitments. Instead, they suggest restructuring loans or deferring repayments. Critics, including the Ombudsman and Human Rights Watch, argue these measures are insufficient and point out past failures. While the report mentions the potential establishment of a “financial ombudsman,” it lacks clarity on how it will adhere to international standards.
According to Pearson, the CAO’s report highlights a troubling lack of accountability that prevents Cambodian borrowers from seeking redress regarding loans supported by the IFC. She urged the Board of Directors to reconsider their decision and embrace the Ombudsman’s recommendations to adequately address these critical issues.
