Cambodia facing microfinance meltdown threat

International financial institutions helped Cambodia build up a microfinance sector whose loans now amount to a third of the country’s GDP. But amid fears that growth is unsustainable experts are worried about an imminent collapse that would be devasting for the emerging economy.

Cambodia’s huge microfinance sector is wobbling in the face of the pandemic, and the collateral damage that its 2m borrowers face could be catastrophic. The sector, which has enjoyed historic support of international financing institutions, could face a painful collapse.

Cambodia, despite having a population of only 16m, has the tenth largest microfinance sector in the world — around $10bn of loans, more than a third of the country’s GDP.

The development of the sector was hailed as a success story by international financing institutions (IFIs) who fostered its development as a means of increasing availability of credit, particularly in rural areas.

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