May 12, 2023
Cambodia loans from banks and microfinance institutions worth $47B

Banks and microfinance institutions provided credit loans worth $47 billion for 4.6 million Cambodians in 25 provincial and capital until 2022, said a report from Credit Bureau (CBC).

CBC, a tech company offering credit reports and compliance solutions, said in the report that 60 percent of the loans were handed over to beneficiaries from Phnom Penh, Kandal, Siem Reap, and Banteay Meanchey, the top four provincial capitals.

As per the report, more than 42 percent of all loans offered went to people as well as organisations based in Phnom Penh with the number of borrowers put at 6.17 million.

Kandal province, which constitutes 5.9 percent of the total volume of loans offered comes second with 37.4 thousand borrowers. It is followed by Siem Reap.

Siem Reap’s loans share stood at 5.3 percent and 31.6 thousand borrowers, while Banteay Meanchey has 21.8 thousand borrowers constituting 5.1 percent of total loans offered.

Mondolkiri, Pailin and Kep are three provinces in particular with loan volumes of less than 1 percent of the total loans nationwide. Since these provinces are on the border of the country, the residents could have lesser credit demands than those who live in or near the capital city.

According to CBC, 76 percent of customers nationwide took loans from a single institution, while 19 percent of customers used two, and the remaining 5 percent used up to three institutions.
https://www.khmertimeskh.com/501289556/ ... worth-47b/

I think one of the problems here is, there are just too many banks and financial lending institutions . Competition is so fierce they will loan money to anyone even if that borrower has no hope of repaying the loan. I would hate to see all the skullduggery that goes on behind closed doors.

How many Banks do we have in Cambodia ?

Last week I sent USA $ 250 from my ABA bank account to a bank account in Malaysia. I was charged a USA $30 fee on top of that ,,, total $280 from my ABA account., and had another $30 fee taken off at the other end ,, I was told by the ABA, Ended up with 957 Ringgits in the Malaysian account. In the past, for $60, I could have bought a Air Asia ticket to deliver the money in person.

How Microloans Betrayed Cambodians
Abby Seiff and Sokummono Khan
Originally pitched as a way to lift the rural poor out of poverty, microfinance is driving many borrowers deeper into debt.
May 30, 2023
(This article is co-published with The Dial.)

On her bank’s loan sheets Ban Sophear looks like an ideal borrower. At forty-seven, she runs a small business buying fish on the southern edge of Cambodia’s Tonle Sap Lake and also owns some farmland. In the past Sophear borrowed a small amount of money—a microloan—to build up her business. She managed to pay it back in full, qualifying her for larger microloans, which are issued by banks that have turned lending to the poor into a lucrative business. In 2022 Sophear borrowed $3,000. She used the money for her business and to pay her son’s school fees. The interest rate is 18 percent—standard for microloans in Cambodia.

We met Sophear in July 2022 at her home in the floating village of Chhnuk Trou in Kampong Chhnang province. A plank connects her shop-house to a pair of large wooden platforms covered with scales, baskets, and ice-filled coolers. Sophear sleeps in the back of the shop-house and runs a store from the front, selling everything from aspirin and eggs to gasoline and nail polish. Bags of candy and potted plants hang from the rafters. Despite her business acumen, Sophear was finding it difficult to make her payments of about $150 a month. To repay the loan, she would have to keep making them without fail every month for two years—a daunting prospect amid her financial insecurity.
Full article: https://www.nybooks.com/online/2023/05/ ... ambodians/

Cambodian Microfinance’s High Repayment Rates Are Built on Misery, Research Finds
Boosters of microfinance claim that it can rescue people from rapacious informal lenders. That’s not the case in Cambodia.
By David Whitehouse
June 27, 2023

Microfinance claims to have a “double bottom line.” Lending to poor populations in developing countries needs to be profitable to be sustainable, while social impact in terms of achieving “financial inclusion” is also demanded by those who invest in the industry.

The truth, for microfinance as for any other industry, is that there is only one bottom line: the financial one. A “double bottom line” is a misleading metaphor.

There’s a growing body of academic research about microfinance in Cambodia which makes that conclusion hard to escape. The latest addition, funded by the National University of Singapore and published in June, was carried out by W. Nathan Green, Theavy Chhom, Reach Mony, and Jennifer Estes. Their key argument is that financial performance indicators used by the microfinance industry in Cambodia, especially portfolio quality, “hide and exacerbate” the ways that borrowers juggle debt between formal and informal lenders.

The researchers carried out 56 interviews with microfinance leaders, state regulators, market consultants, and international investors in Phnom Penh, as well as interviews with 16 bank and microfinance branch staff, 18 informal lenders, and 11 local authorities in Battambang province. The interviews took place in 2021 and 2022.


Based on the idea of a double bottom line, international microfinance investors often use portfolio quality as a proxy for social impact. The real bottom line is that high rates of non-performing loans (NPLs) raise the future cost for Cambodian banks and microfinance institutions to secure their funding. If their NPLs exceed the levels specified in loan covenants, the loans can be clawed back.

So, as in any other kind of lending, NPLs have to be kept down by any possible means. The specific problem in Cambodia is that the country has the world’s largest proportion of microfinance borrowers relative to its population, with average loan sizes well in excess of per capita annual income. There were 3.06 million active microloans in Cambodia in 2022, in a country with only 3.6 million households. The majority of the loans are secured by land-based collateral.

One of microfinance’s leading claims is that it can rescue people from informal borrowing. That’s not happening in Cambodia, where one in three adults borrow from both formal and informal sources. The research found that 32 percent of interviewed households with a formal loan were using informal lenders to be able to repay formal loans.

Some are borrowing from daily lenders and pawnshops charging interest rates of between 20 percent and 30 percent per month. “So long as repayment rates are considered an indicator of success, then the risks associated with juggling debt are likely to increase,” the research finds.

Cambodia’s high repayment rates, the research finds, depend on “coercive peer pressure, social shaming and various forms of gendered exploitation.” The costs of a good repayment record very often include malnutrition, forced migration, child labor, debt bondage, and land dispossession, the research finds. One family told of their aging mother who sold land before she died to avoid having debt hanging over her in the afterlife, which she believed would cause her to be reborn at a lower status.
Full article: https://thediplomat.com/2023/06/cambodi ... rch-finds/

Damage done.

The only way out would be to replace the credits held by the MFI with interest free loans by World Bank or any similar institution (private or governmental). Whats a few billions in times of war?

Long read.
Looking for solutions...

We Know Microfinance Harms Cambodia’s Poor. What Can Be Done About It?
Much ink has been spilled identifying the many problems with the sector, but much less so about possible ways forward.
By David Hutt
July 05, 2023

Stripped of the realities of human selfishness and incompetence, microfinance seems a perfect model. Include the poor in the financial sector, give them small loans to invest in their business or purchase property, and they’ll slowly raise themselves out of poverty, becoming asset-owning, self-reliant citizens. There is no shortage of research and articles showing just how badly this has gone in Cambodia. The latest addition, by a researcher at the National University of Singapore, was published in June. Read David Whitehouse’s write-up of that in The Diplomat.

One might argue that it’s no different from other utopian theories that run aground because of human nature. Or, again like all utopianists, the microfinance theory is sound but it has only ever been imperfectly implemented. That, or you can also look at Cambodia’s history and see how the French colonists and the Sihanouk regime (1953-1970) attempted to create “agrarian capitalism” by developing a cash system in the countryside and modernizing land ownership, yet instead created mass indebtedness. A recent book on Cambodian famines, by James A. Tyner, noted that “Sihanouk’s limited efforts to address land reform often led smallholders to contract unpayable debts and to suffer subsequent landlessness,” which rose from 16 percent in 1962 to 20 percent eight years later. Plus ça change.

So we’ve been informed about the impact of microfinance in Cambodia (and your columnist had spilled much ink in the debate, including here in The Diplomat). Rarely is it asked: what’s the solution? Are there alternatives? Is it now too late to do anything bold enough to fix the problems? Does the sector just need some tweaking, some reforms that are actually enforced by a sharp-toothed regulator, as well as some debt forgiveness from the lenders and a national debate about the merits of microfinance longer-term? Or does it need to be stripped away, a revolutionary change to a different sort of lending?

Back in 2020, I gave a seven-point list of reforms that could still be useful...

Read on. Full article: https://thediplomat.com/2023/07/we-know ... -about-it/

August 15, 2023
ABC, CMA urge investigation into alleged suicides
Kang Sothear / Khmer Times

The Association of Banks in Cambodia (ABC) and Cambodia Microfinance Association (CMA) called for an independent investigation into the recent allegations of suicides and attempted suicides due to over-aggressive handling by credit officers in Ratanakiri province.

The officials of ABC and CMA pointed out that the two associations have found the preliminary results of relevant evidence collection and verification, which shows that the four alleged suicides and one attempted suicide have not had direct relations between banks or microfinance institutions and their respective customers as alleged.

“There have been allegations made on number of alleged suicides and attempted suicides due to over-aggressive handling by loan officers in Ratanakiri. ABC and CMA consider these allegations seriously. The ABC and CMA strongly advocate and support the agenda on Responsible Lending and Consumer Protection,” CMA and ABC said in a joint statement.

“We (the two associations) have requested the individual institutions in the report to conduct a thorough review of the accounts. We also strongly believe that an independent investigation is needed to ensure the integrity of the findings. Should there be misconduct found, we strongly support disciplinary actions to be taken against the institutions or individuals concerned.

We believe such action is necessary to restore the reputation and confidence of our financial system,” it said.

“We appreciate the interests of the NGOs on this matter, and we hope that in the future we can work with them constructively to protect consumer interests. The ABC and CMA with the support from NBC continue to strongly advocate both financial literacy and financial access agenda alongside ensuring all members adhere to our Responsible Lending and Code of Conduct.

We will also continue to review our individual credit assessment and collection policies and make necessary refinements to ensure the right balanced approach is taken, where the interest of both customers and banks/MFIs are protected,” the statement added.

Meanwhile, Kaing Tongngy, Head of Communications Department of CMA, said that the allegations have been the first-ever most serious cases in the history of Cambodia’s banking and microfinance sector, which requires a serious multi-stakeholder independent investigation to find the truth or facts that reflect the integrity of the two sectors.

“We have been working with our members to collect documents and evidences relevant to the cases and thus far we have not found the direct relation between the institutions and their customers that led to the alleged suicides and attempted suicides.

However, the findings have just been from the audit report made by each institution,” said Tongngy.

“As these are very serious cases, we believe that there should be an independent investigation to verify whether there are really suicides or attempted suicides due to the pressures of owing money to banks or microfinance institutions or not. If real cases are found, relevant persons and institutions will face penalties,” Tongngy added.
https://www.khmertimeskh.com/501342666/ ... -suicides/

Report | Debt Threats: A Quantitative Study of Microloan Borrowers in Cambodia’s Kampong Speu Province
Released in August 2023


Equitable Cambodia (EC) and the Cambodian League for the Promotion and Defense of Human Rights (LICADHO) today are releasing Debt Threats: A quantitative study of microloan borrowers in Cambodia’s Kampong Speu province. The report features findings from a survey of 717 households.

The research shows that widespread over-indebtedness has led to significant numbers of serious human rights abuses – including hunger, child labour, and coerced land sales – across Kampong Speu province. Borrowers are making unacceptable sacrifices to repay loans that are overwhelmingly collateralised with land titles, and that often far exceed borrowers’ incomes and ability to repay.

“This research adds further evidence that human rights abuses are occurring frequently and systematically in Cambodia’s microloan sector,” said Pilorge Naly, LICADHO’s outreach director. “Cambodian borrowers do not have time for further delays. They need urgent debt relief for the most over-indebted borrowers in order to prevent this human rights crisis from worsening.”

Key findings of Debt Threats include:

▪ Most borrowers are over-indebted, with more than two-thirds of borrowers “strongly agreeing” or “agreeing” that their households have too much debt, and with more than 27% spending more than 70% of their income on debt repayments each month.
▪ More than 92% of households had to provide at least one land title to access a microloan.
▪ 6.1% of households sold land to repay a debt. Every MFI/bank that held more than 1% of loans in the survey were implicated in at least one debt-driven land sale.
▪ Child labour and children dropping out of school due to MFI/bank debt is far too common. About 3% of households had a child drop out specifically due to an MFI/bank loan, with many children going to work to help repay those loans.
▪ Nearly one-fifth (18.3%) of respondents were eating less food after borrowing from an MFI/bank.
▪ People are increasing their borrowing to repay other loans. In 2012, only 3.45% of loans went to repaying existing loans. That percentage rose to 34.8% of loans in 2022.
▪ The vast majority of borrowers do not understand the legal process for defaulting on loans, or do not believe that it will be used. Less than 2% of all respondents reported that they thought a seizure of land would occur in accordance with the law in the case of default.

Investors, authorities and development actors need to take immediate steps to enact remediation for borrowers and ensure these predatory practices stop, and put in place necessary consumer protection regulations so that we can ensure borrowers’ fundamental human rights are respected

Debt Threats is the fifth report produced by local Cambodian human rights NGOs since 2019 that focuses on harms associated with microfinance debt in the country. It is also the first to use a quantitative methodology to examine the scope of these harms.
In full: https://www.licadho-cambodia.org/reports.php?perm=242
From the link:
Download this report in English
(PDF, 7.74 MBs)
Download this report in Khmer
(PDF, 11.02 MBs)
Listen to audio version in Khmer