Now that it is generally agreed that Cambodia’s microfinance sector has utterly failed to achieve its original, honorable goals – and, worse still, has produced a debt crisis that risks driving tens of thousands into poverty and landlessness – attention is turning to possible solutions.
In a recent article, four senior members of Cambodia’s civil society, associated with the Center for Alliance of Labor and Human Rights, argued that “what is needed is relief in the form of debt forgiveness and write-offs, in significant numbers, to prevent borrowers from losing their land en masse.” A fine suggestion, but some of the intricacies must be discussed. First, debt forgiveness for whom? If we assume that not every borrower can have their debts wiped out – given outstanding microfinance debt now exceeds $10 billion, just under a third of GDP – then some criteria must be established. Will debt forgiveness only be extended to the poorest of borrowers, or those most at risk of losing their land or homes put up as collateral, or those most likely to fall further into poverty if they are forced to make repayments?