The dual development of Financial and Comprehensive Trust Laws brought Cambodia into the fold of modern legal finance, transforming donor legacies into enduring legal frameworks for national growth.
— Cambodia —
inclusive. enduring. transformative.
Building Trust in Cambodia’s Financial Future: Drafting a Dual-Track Legal Framework for Financial and General Trusts
"An effective financial trust law for the legal recognition and protection of the MFI seed funds are the 'key' to ensuring access to finance and inclusive growth for Cambodia, particularly in rural areas."
— In Channy, Chairman of ACLEDA Bank and Deputy Chairman of the Association of Banks in Cambodia
Challenge
Cambodia's post-conflict legal environment presented a fundamental obstacle: the absence of a legal framework recognizing trusts—a concept deeply rooted in common law but alien to Cambodia's civil law system. This gap posed specific and urgent problems in two areas:
- Microfinance Institutions (MFIs): Many MFIs initial capital came from donor funds held by non-governmental organizations (NGOs). These funds were not recognized by any legal mechanism, creating accounting ambiguities, ownership uncertainties, and regulatory inconsistencies.
- Financial Market Development: Cambodia's ambition to develop capital markets, pension funds, escrow arrangements, and collective investment vehicles was hindered by the lack of a comprehensive legal infrastructure for trust-based asset and financial models.
Without a formal legal mechanism, public, donor, and private asset stewardship remained unregulated and susceptible to institutional fragility. The situation undermined investor confidence, blocked innovation, and hindered long-term financial sector development—particularly in rural and underserved areas.
Strategy
From January 2012 to December 2014, GG International's legal drafting expert and Chief Legal Officer, Shaan Stevens, was engaged by the Asian Development Bank under TA-7934 to work with the Ministry of Economy and Finance (MEF) to design and draft two landmark legislative frameworks:
- The Financial Trust Sub-Decree:
- Targeted MFIs established through donor assistance.
- Created a special legal category—Microfinance Trusts—enabling MFIs and associated NGOs to restructure, register, and operate under a formal fiduciary model.
- Recognized NGOs holding donor capital "on trust" for the benefit of Cambodians, thereby converting them into legal Financial Trusts supervised by MEF.
- The Comprehensive Trust Law for Cambodia:
- Broadened the concept of trusts beyond MFIs to encompass investment vehicles, public trusts, pension schemes, insurance pools, and escrow arrangements.
- Provided legal clarity and registration mechanisms under MEF’s jurisdiction.
- Ensured cross-sectoral alignment with other ministries (Justice, Commerce, Interior) to support proper oversight
Key initiatives included:
- Extensive consultation across ministries and private sector actors such as ACLEDA Bank, NBC, and the Cambodian Microfinance Association.
- Public presentations and legal training sessions to demystify the concept of trusts for civil servants and regulators.
- Drafting explanatory notes for the Council of Jurists to prevent loss of legislative intent during review stages.
Transformation
The project laid the groundwork for a transformational legal instrument that now enables Cambodia to:
- Recognize donor-funded MFIs as legal Financial Trusts securing long-term legal title over assets and institutional continuity.
- Establish a platform for pension funds, stock exchanges, and collective investments—unlocking new financial services and products.
- Provide a registration and supervisory mechanism under the MEF, ensuring governance, transparency, and regulatory compliance.
- Transition NGOs out of informal status into registered financial entities, reinforcing public trust and legal clarity.
The laws positioned Cambodia to leverage global legal instruments for local benefit, improve rural access to finance, and stimulate responsible financial sector expansion.