As virus hits Cambodia’s economy, the debts grow

The rural economy faces a dire future with many relying on loans from micro-finance organizations.

A debt crisis was already brewing in Cambodia before the Covid-19 pandemic spawned a global recession. But without proper management, Cambodia’s economic woes risk turning into a financial crisis, too.

The World Bank estimated that outstanding loans from the banking and microfinance sectors were worth more than 100% of the country’s gross domestic product – or about US$25 billion – for the first time last year, while the true value of Cambodians’ indebtedness is likely much higher, given the size of the illegal money-lending market.

The National Bank of Cambodia, the central bank, has even warned of the “destabilizing effects on the economy” of rising individual debt, according to its Financial Stability Review published in April last year.

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