Hit by climate change, farmers in Cambodia are risking everything on microfinance loans

Crop failures due to erratic weather and wildfires are leading farmers to take out loans to survive, with their land — and therefore livelihood — as collateral, a new report highlights.

The “microfinance” industry — long touted as a way to help poor, rural communities in developing countries — is pushing tens of thousands of farming families into debt traps as they attempt to adapt to a changing climate, according to a report.

The study, conducted by researchers at a group of U.K. universities, looked at a range of case studies in Cambodia, where it found easy-access loans had caused an “overindebtedness emergency” that was undermining borrowers’ long-term ability to cope with their new environment.

Modern microfinance institutions (MFIs), which are generally small, locally run organizations with a variety of funding sources such as international investors, banks and development agencies, emerged in the 1970s and grew rapidly in the early 2000s. They were promoted as a way to provide financial services, typically small working capital loans but also savings accounts and insurance, to the traditionally unbanked — such as women and people on very low incomes.

In full: https://www.cnbc.com/2022/12/27/facing-climate-change-asia-farmers-turn-to-risky-microfinance-loans.html

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