New Loans Bring Risks, Rewards for Aspiring Students

Today, Puth Chakrya works in a factory. Tomorrow, she’d like to manage one.

To get there, the 20-year-old has taken out one of the first student loans offered by Acleda Bank. She is now studying management at Svay Rieng University.

“If I didn’t get the loan, I couldn’t go to my college for my future,” she said.

Ms. Chakrya is one of 54 students to receive a loan from Acleda last year, the first time a major bank in Cambodia has offered such a deal targeted at students. But while the loan allows Ms. Chakrya to attend school on the weekends, there’s no guarantee a job awaits upon graduation.

According to official figures, unemployment for Cambodians with university degrees is low—3.6 percent. But that is twice as high as the rate for Cambodians who do not go to college. High school graduates have a 1.3-percent unemployment rate, and those who only completed primary school have a 1.4-percent unemployment rate, according to the International Labor Organization.

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Ros Salin, cabinet chief at the Education Ministry, said many banks do not give student university loans as they are concerned students will not earn enough to pay it back.

“The ministry doesn’t have the student loans, because we don’t have a lot of money to do this project,” Mr. Salin said. He promised to “discuss this project soon,” but did not specify a date for starting a government college-loan program.

Ms. Chakrya currently pays $32 a month on the loan. If she were to default, it could cost her parents the land they used as collateral.

To become a manager, a college degree is increasingly necessary, said Yuos Haksovatha, a senior recruitment consultant at HR Inc., a human resources company in Phnom Penh. Of the 400 to 500 openings from their clients, about 90 percent to 95 percent require a university degree.

“A university degree is very important nowadays,” Ms. Haksovatha said, adding that it is also important for students to show their skills and ability to potential employers. “If the people do not earn a university degree, it is a bit of a challenge, and can be very difficult to show their compatibility.”

Although some companies and NGOs find university graduates unprepared for jobs, the degree is still important, said Martin McCarthy, managing director of Total, the French energy company. Although students often leave university unprepared for company work, that does not mean they will do better without a degree.

“None of this precludes the absolute need to have a degree to be an engineer!” McCarthy said in an email. “It simply means we must spend more time and money than we should bringing them to the level that we need.”

Experience is also crucial, Ms. Haksovatha, the recruitment consultant, said. She added that for Ms. Chakrya to become a manager, she should expect to first put in several years of experience with the company. Starting salaries for university graduates in Cambodia are about $150 per month, five times the monthly amount Ms. Chakrya currently pays on her loan of $700.

Students can borrow as much as $30,000 and use the loans at any Cambodian university or overseas, although no students have yet opted to go abroad.

In the U.S., $30,000 barely covers a year’s tuition for a foreign student—not including room and board.

However, Acleda’s loan might be the only option for students.

Although the Ministry of Education offers 4,200 scholarships, there are no funds to help students at the college level, said Mr. Salin of the Education Ministry.

In the private sector, Acleda’s interest rates range from 1 percent to 1.8 percent, said Nou Sotiara, vice president and deputy head of credit division at Acleda Bank.

A fear of failing to pay back the loan is a major concern for Cambodians, said Dawn Kwan, the Southeast regional program manager for Vittana, an NGO that allows donors to give small loans to students interested in going to university. Vittana’s loans to students range from $350 to $8,000, and donors can loan as little as $25 to students.

“Even through there aren’t a lot of options, a lot of parents of students are worried about taking on a huge debt when it’s not guaranteed,” Ms. Kwan said.

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