Cambodian workers owe $10 billion in microfinance debt as COVID-19 wipes out incomes

As COVID-19 wrecks Cambodia’s economy, workers and families face added risks from record-high levels of microfinance debt. Without income, many will be unable to repay their microloans and may lose their land or be forced further into debt.

From health care systems to income and poverty, the COVID-19 crisis is highlighting deep inequalities across Southeast Asia. In Cambodia, the economic slowdown has derailed the garment industry, which employs over 800,000 workers in a country of 16 million. Due to declining demand, over half of the country’s garment factories will likely close by the end of April.

With many Cambodians out of work, COVID-19 is also throwing another problem into sharp relief: that of precariously high microfinance debt. Cambodia has the highest microloan debt per borrower in the world at around US$3,800, almost twice the country’s GDP per capita. Over 2.6 million Cambodians currently hold microfinance loans, collectively worth a total of over $10 billion, according to the Cambodia Microfinance Association. These numbers don’t include widespread informal lending.

As Cambodian workers are left out of jobs with minimal government assistance, this debt has become a major concern. Four out of five garment workers hold a microfinance loan. For many families, loan payments now represent a threat to their future, their savings and even their land. The impacts of overwhelming debt are also starkly gendered: women are traditionally in charge of household finances in Cambodia and around 75% of microfinance clients in the country are women.

In full:

Related Stories

Latest News