Is Cambodia’s Government Ready to Tackle the Problems in Its Microfinance Sector?

In the last five years, the rapid growth of Cambodia’s microfinance sector has been accompanied by a sharp increase in over-indebtedness among rural Cambodians. According to the government’s Cambodia Socio-Economic Survey for 2019 and 2020, the average amount of debt per household rose by 85 percent year on year, from 9.6 million riels (around $2,400) to 17.7 million riels ($4,400).

For rural Cambodians, indebtedness is a complicated problem – and one that is often tangled up with land tenure security. The practice of collateralizing microloans with land titles has meant that for many families defaulting on a loan means losing their land. To these rural agricultural families, losing land not only means losing their property, it means losing their livelihood and income. Last week, two Cambodia-based civil society groups called attention to the “grave harm” caused by runaway debt levels, which they said “have destroyed lives and wrecked communities across Cambodia.”

In theory, microfinance institutions (MFIs) are meant to provide financial opportunities and risk-management tools for the poor. Due to lack of regulations and effective policies, however, MFIs in Cambodia are not meeting these goals. But the lack of critical policy isn’t the only issue. In terms of the policies that have been implemented, there is not nearly enough analysis assessing the on-the-ground impact of the interventions that the government has already made.

In full: https://thediplomat.com/2022/05/is-cambodias-government-ready-to-tackle-the-problems-in-its-microfinance-sector/

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