Western Investors Are Losing the Ability to Shape the Future of Cambodian Microfinance

The industry’s foreign financial backers are now aware of the scale of the country’s over-indebtedness – but they have lost the ability to do much about it.

Western microfinance investors worried about over-indebtedness in Cambodia are losing the ability to shape the practices of an industry whose rapid growth they helped to foster.

Microfinance in Cambodia started in the 1990s as a form of foreign aid aiming to help rebuild a country recovering from war. It has since grown into a profitable industry, with the number of microfinance borrowers increasing from 175,000 in 2000 to 2.6 million in 2020. The country now has one of the world’s highest rates of microfinance debt relative to personal income.

In Cambodia and elsewhere, microfinance lenders commonly present anecdotal evidence about relatively well-established small businesses benefiting from credit as proof of their “impact.” Academics argue that there is no statistically robust evidence that microfinance lending does any good overall. It is, in fairness, hard for anyone to prove whether or not the success stories would have happened without microfinance. But focusing on the successes ignores the failures, and the human costs to those who are struggling to service their loans.

In full: https://thediplomat.com/2023/02/western-investors-are-losing-the-ability-to-shape-the-future-of-cambodian-microfinance/

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