Cambodia’s Debt Trap: Taking Out New Loans to Pay Back Old Loans

A new report suggests microfinance may no longer be working in Cambodia, where the industry holds at least $8 billion in outstanding debt and the average debt is about three times the 2017 GDP per capita.

Two years ago, Phel Hoeun, a mother of five, used the title to her home as the collateral to borrow $8,000 from Thaneakea Phum, a microfinance institute in Cambodia.

Once approved, she used the money she had borrowed to purchase a four-hectare plot of land.

Phel Hoeun, 47, is a laborer, her income dependent on the daily needs and whims of employers. She envisioned planting the land with cassava, which is used to make flour, tapioca and animal feed. But between meeting daily expenses and the monthly $300 loan repayment, everyone in her family needed to leave their land to find work. Like hundreds of other Kok Doung commune residents here, Phel Hoeun and her family could not afford the time to farm.

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