Cambodia Has a Big Problem With Small Loans

Cooldude · Post by **Cooldude** » Sun May 15, 2022 12:03 pm

Alex wrote: ↑Sun May 15, 2022 11:24 am
AndyKK wrote: ↑Sun May 15, 2022 10:14 am I recently paid off the debt, lone of my late partners sister, so she and the family were now debt free! 2 days later she took out another lone.
That's the problem. Unless you can educate the people you help to be more responsible with their finances, they'll end up in the same situation you rescued them from in no time. I've had the same happen.

This kind of mentality is worldwide and not exclusive to Cambodia.

CEOCambodiaNews · Post by **CEOCambodiaNews** » Thu May 26, 2022 7:35 pm

Cambodia’s microloan sector under scrutiny as poor drown in debt
International Finance Corporation’s watchdog is probing claims loans aimed at hard up are harming communities.
Sam, a tut-tuk driver in Siem Reap, is unable to repay his bank after borrowing $20,000
By Phorn Bopha
Published On 26 May 2022, 26 May 2022

Siem Reap, Cambodia – When Sam’s hard-up relatives needed money to buy a plot of land and start their own business several years ago, they turned to Sathapana Bank in Siem Reap to borrow about $20,000.

Now the Siem Reap tuk-tuk driver and his wife are struggling to make monthly repayments of about $500.

“We do not have the capacity to pay, so we missed payments,” Sam, who asked to use a pseudonym, told Al Jazeera. “We could only pay a small amount of the interest.”

Sam and his family are not alone.

Cambodia’s microfinancing sector, which purports to alleviate poverty by offering financial services to people excluded from traditional banking, is under scrutiny as the watchdog of the International Finance Corporation investigates complaints that the body’s funding of microfinance lenders has caused “grave harm” to local communities.

The Cambodian League for the Promotion and Defense of Human Rights (LICADHO) and Equitable Cambodia (EC), two local advocacy groups, have accused the World Bank’s sister organisation of “reckless investments” that “destroyed lives and wrecked communities”.

The complaint, which the IFC’s Compliance Advisor Ombudsman (CAO) accepted for review earlier this month, claims the financial institution provided $400m to six Cambodian lenders over the last five years without meeting its obligation to “conduct due diligence and supervise projects to ensure compliance with performance standards”.

The lack of due diligence, the NGOs say, has fuelled overindebtedness that has resulted in child labour and families being forced to sell their homes and land.
https://www.aljazeera.com/economy/2022/ ... wn-in-debt

Cooldude · Post by **Cooldude** » Thu May 26, 2022 8:24 pm

Give this topic a rest already.

https://www.incharge.org/debt-relief/ho ... ay%20loans.

Anchor Moy · Post by **Anchor Moy** » Fri May 27, 2022 1:30 am

Cooldude wrote: ↑Thu May 26, 2022 8:24 pm Give this topic a rest already.

https://www.incharge.org/debt-relief/ho ... ay%20loans.

Not sure what you mean by that ? Cambodia has a huge problem with loans. Very poor people are losing the little that they have, because without understanding the maths of repaying interest, they take out loans that they cannot repay. They lose their land and their homes.
Just because this also happens elsewhere doesn't make it less important here. Does it ?

AndyKK · Post by **AndyKK** » Fri May 27, 2022 8:55 am

For the lender it is daily business. For the borrower, its simplistic, don't take what you can't afford.

Cooldude · Post by **Cooldude** » Fri May 27, 2022 10:42 am

Anchor Moy wrote: ↑Fri May 27, 2022 1:30 am
Cooldude wrote: ↑Thu May 26, 2022 8:24 pm Give this topic a rest already.

https://www.incharge.org/debt-relief/ho ... ay%20loans.
Not sure what you mean by that ? Cambodia has a huge problem with loans. Very poor people are losing the little that they have, because without understanding the maths of repaying interest, they take out loans that they cannot repay. They lose their land and their homes.
Just because this also happens elsewhere doesn't make it less important here. Does it ?

People borrowing money and losing their collateral because they can't repay the loan has been going on for thousands of years and goes back to biblical times and the creation of usury laws.

Anchor Moy · Post by **Anchor Moy** » Fri May 27, 2022 2:31 pm

The link posted by cooldude shows that people in the US also take out stupid loans which make them run into debt, but all I am saying is that Cambodia is in a particularly bad small loan situation. I know some people personally that will now never get out of debt.
My personal opinion is that it is too easy to get a loan in Cambodia. Even if you cannot read or understand a contract, someone will lend you money.
Also, many Cambodians have lost their jobs and investments due to the Covid-produced downturn in tourism which came without warning.

From the OP:

Assets and credit at MFIs in Cambodia have risen more than 10-fold since 2010, according to the World Bank. The average loan size in Cambodia is now among the highest in the world, growing from $200 to $1,000 in the decade to 2014 -- twice the pace of per-capita income. About 2 million borrowers owed a record $2.8 billion at the end of 2017, National Bank of Cambodia data shows.

As many as 10 percent of borrowers can’t pay their debts, said Ou Virak, director of Phnom Penh-based think-tank Future Forum. “While incomes have risen in the past 10 years, an economic decline could create an unsustainable environment while people are losing their jobs.”

The average loan size of MFIs that focus on the poorest clients in Cambodia stood at 70 percent of median annual income in 2016, according to a report by consultancy group Microfinance Index of Market Outreach and Saturation (Mimosa) that was commissioned by the Cambodia Microfinance Association.

This puts Cambodia among the leaders in developing nations in terms of the percentage of people who borrowed money from a financial institution, according to the World Bank. By comparison, the bank estimates only 3.6 percent held savings at a financial institution in 2016. Outstanding MFI loans amount to a staggering 12 percent of gross domestic product.

Tootsfriend · Post by **Tootsfriend** » Sat May 28, 2022 4:35 pm

Tootsfriend wrote: ↑Thu May 05, 2022 7:19 pm My recent experience with Finance companies in Cambodia. Mature female factory worker earning $250 a month, gets a loan of $6,000 from K,Kredit to buy into a multi level marketing scam selling cosmetics, skin whiting products etc. She cannot sell any, so goes to a new Korean Banking / Finance company that is making inroads in Cambodia. Asks for a $10,000 loan to pay off the previous lender. Repayments are $281 per month. This includes $3,000 in interest. .Acting as security for this is her 20 year old daughter, earning $200 per month and 18 year old daughter still going to school, no bank account , no money, no job.

So whats in it for the finance company, ????. Well they hold the title of the house and as no payments are made they can sell the house, probably at a low price, after all they only want their money and interest payments back. The Bank manager probably got his bonus for making the loan.

The loan and finance industry certainly need a big cleanup as there are so many of them it is impossible them all to survive unless they enter into unscrupulous one-sided deals .

I would like to tell the second half of this story.

I decided that as I was paying off the loan every month, I would pay the balance in full to wipe out the debt. This would include having to pay a 6% penalty fee. After 3 attempts in 3 days to get a final figure which came to $6,184 , I handed over $6,200 , expecting to get $16 change, but was told they would give the change to me in 3 days time when I came to pick up the hard title. Went back in 3 days only to be told they did not have the hard title, we would have to pick it up at the Land Titles Office. And my $16 change ? Oh we cannot hand out that to you as the loan was not in your name, we have deposited it in that persons bank account . [ yes the one that has no money to pay the loan }

Next was a trip to the Land titles Office where they would not hand over the Hard Title until we showed a receipt to prove we had paid the Property Tax .

Next was a trip to the Tax Department to pay the Property Tax, [ several trips actually ] but they want the Hard Title to register the property for future and past Property taxes.

Which comes first , the chicken or the egg ?

As with everything in Cambodia you throw your hands up in the air and say to hell with it, I give up and nothing gets done.

CEOCambodiaNews · Post by **CEOCambodiaNews** » Mon Sep 19, 2022 10:12 pm

CAMBODIA
An 'alarming' number of Cambodians sell off their homes to pay off debts
09/19/2022
An 'alarming' number of Cambodians have had to sell their homes and property to repay credit card charges or debts accumulated through small loans. This is the finding of a micro-finance study, according to which many families had entered into agreements for loans at 18% interest. In one year, almost 34,000 sales were made to repay debts.
https://www.asianews.it/news-en/An-%27a ... 56683.html

Post by **Clutch Cargo** » Tue Sep 20, 2022 12:57 pm

CEOCambodiaNews wrote: ↑Mon Sep 19, 2022 10:12 pm CAMBODIA
An 'alarming' number of Cambodians sell off their homes to pay off debts
09/19/2022
An 'alarming' number of Cambodians have had to sell their homes and property to repay credit card charges or debts accumulated through small loans. This is the finding of a micro-finance study, according to which many families had entered into agreements for loans at 18% interest. In one year, almost 34,000 sales were made to repay debts.
https://www.asianews.it/news-en/An-%27a ... 56683.html

Unfortunately, the link doesn't provide more detail etc.. other than the source being a micro-finance study.

Is anybody surprised in view of the pandemic, lack of tourism and flow-on effects?

Is 34,000 'alarming' in the context of normal year on year sales to pay off debt?

Cambodia Has a Big Problem With Small Loans

Re: Cambodia Has a Big Problem With Small Loans

Re: Cambodia Has a Big Problem With Small Loans

Re: Cambodia Has a Big Problem With Small Loans

Re: Cambodia Has a Big Problem With Small Loans

Re: Cambodia Has a Big Problem With Small Loans

Re: Cambodia Has a Big Problem With Small Loans

Re: Cambodia Has a Big Problem With Small Loans

Re: Cambodia Has a Big Problem With Small Loans

Re: Cambodia Has a Big Problem With Small Loans

Re: Cambodia Has a Big Problem With Small Loans

Who is online

Register/Login to CEO with your Social Media Account: