Trust in commercial banks has increased in recent years, and in 2005 about 20 percent of GDP flowed through financial institutions. But banks are still viewed with suspicion by many Cambodians, who prefer instead to seek out the traditional, unregulated savings-and-loan scheme: Tong tin.
Economists and officials are trying to learn more about the role of tong tin in the Cambodian economy and are debating whether the informal scheme, which leaves millions of players open to fraud, should be regulated.
“Trust in each other is the key rule of tong tin,” said Sea Huoy, 37, a mother of three who has been playing tong tin for 12 years. Despite once losing about $10,000 to four players who fled with the tong tin pot, Sea Huoy said she will continue to try her luck.
“I don’t like to go to the bank, I don’t know the banking system. I just save money and raise money in our traditional way,” she said.
While there are variations, most tong tin games share a basic structure: At the head is a trusted banker who organizes the payments from each player, neither taking out loans nor earning interest. In some groups, the banker earns handling fees.
In a very common version of tong tin played in Phnom Penh, the number of people involved determines the number of months the game runs. Five people participating means that there will be five months of play.
In the first month, the five players give a set amount each—say, $50—to the banker. At the beginning of the second month, the players secretly bid for the right to take the pot by offering an interest rate to the others. The person offering the highest interest rate withdraws the entire pot, and the interest that was offered is given back to the other players.
The result of this system is that early takers of the pot typically lose some money in terms of interest paid, but get a collateral-free loan. Those who hold out until the end earn interest.
Compared to loans from banks, the interest rate is difficult to calculate and is variable. But players in Phnom Penh insist that tong tin is the only way to go.
“I never think about borrowing money from a bank; it is slow, they ask for collateral,” said market vendor Sor Chanavy.
“If I need my money in a hurry, I can get my savings from the tong tin,” she said.
Sor Chanavy said she is lucky in that she has never been part of a tong tin that collapsed after a player took the money and ran. But, she said, she takes great precautions before investing in a tong tin.
“I think a lot, I have to find out if the banker is a good person, has a big house or if her husband is a high-ranking official,” she said. “If anyone breaks the trust, members lose.”
But prosecuting tong tin cheats is a major problem, she said.
“We can’t complain to the authorities because we agreed to play without informing the authorities,” she said, adding that vendors in the market play tong tin at $50 to $200 per month between 10 and 40 players.
For financial experts, the question is whether regulation will hurt a practice that gets credit into communities where commercial banks do not venture, or whether a lack of regulations is leaving players exposed.
Finance Ministry Secretary-General Hang Chuon Naron said that because about 15 percent of Cambodians are estimated to be involved in at least one tong tin game at any given time, an article should be added to the civil code to protect players.
“In the 1960s, tong tin was addressed in the civil law…such regulation can insure players if the head banker runs away,” Hang Chuon Naron said.
He added that the government does not plan to control tong tin other than by setting out ways tong tin players can sue fellow players to recover money. Currently, tong tin players can file criminal complaints if they are defrauded and have witnesses.
Huot Pum, a professor of banking and finance at the Royal University of Law and Economics, said tong tin should be formalized with set rules of play.
“We should allow tong tin activities to be practiced among poor people, but turn it into a formal type of microcredit with set rules of play,” he said.
“The newspapers are filled with reports of people who hang themselves because of tong tin,” he added.
Professor Douglas Arner, a financial law expert based in Hong Kong, said that as Cambodia grows richer it may wish to regulate tong tin.
“In China we have seen tong tin syndicates develop with millions of dollars at stake and there have been some problems with fraud,” he said.
He noted that tong tin has been a fixture in Asia for hundreds of years, though no country has moved to regulate the industry.
Kang Chandararot, the head of the Cambodia Institute of Study, said that regulating tong tin could burden the system with official and unofficial fees.
“If we put tong tin under a law, I believe it will be a negative result,” he said. “[Tong tin] solves a lot of social problems.”
Tal Nay Im, director-general of the National Bank of Cambodia, confirmed that the bank has no plans to seek a special law or regulation of tong tin. She said the civil code can be used to charge people who defraud tong tin players.
Proponents of the emerging microfinance sector say that tong tin is far too insecure to sustain Cambodia’s economic development and is an overly risky proposition for the poor.
“Tong tin is traditional microcredit but it cannot compete with microcredit because tong tin is not secure,” said In Channy, general manager of Acleda Bank.
But for players like Sing Sereyrith, a resident of Phnom Penh’s Stung Meanchey district, it is corruption and inefficiency in all Cambodian institutions that keeps her playing the Cambodian money game.
“In the 1960s…if anyone ran away [with tong tin money] the commune authorities went to their home and started to auction property,” he said, adding that now things are different.
“Even if there is a law, I don’t trust the court; I have more trust in my friends,” he said.