Cambodian Household Debt is Cause for Concern

[CEOCambodiaNews]

To be down, out and in debt in Cambodia
The transition from a subsistence to consumer economy has resulted in rising household debts, growing inequality and waves of outward migration
By David Hutt, @davidhuttjourno Phnom Penh, September 14, 2018 6:24 PM (UTC+8)

Vattana San, 24, took out his first loan two years ago to purchase a new motorcycle. His parent’s farm, on the outskirts of Phnom Penh, the capital, was turning a profit and the new vehicle allowed him to travel more easily into the city, where he had just started a new service sector job.

But a bad harvest the following year meant his parents couldn’t afford to repay their debts, so he neglected his own loan to lend a helping hand.

Then one loan turned into two as his family’s financial situation deteriorated to an extent they were forced to sell the farm land that provided their livelihood and income to pay back lenders.

Vattana’s indebted family is not alone. Cambodia’s total household debt stood at US$2.9 billion in April 2018, compared to US$2.35 billion the same month last year, according to the CEIC, a US-based data research company that used National Bank of Cambodian data in its research.

A decade ago, when Cambodia was still largely a subsistence economy, total household debt was only US$200 million. Recent fast growth, with the economy projected to grow 7.2% this year, has come with more debts as Cambodians enter a more consumption-driven modern economy.

Kimty Seng, a local economics lecturer, says he is concerned that if borrowers don’t soon change the ways they use their loans it will threaten the entire financial system.

Analysts say that many borrowers take loans for non-productive purposes, such as purchasing vehicles and consumer items, or simply to pay off other debts. Few borrowers, they say, put their loans towards investments that can boost their future incomes.

As many fail to raise more capital from their borrowings, they then struggle to meet repayment schedules and eventually default. In other cases, borrowers take out additional loans from other creditors to repay their original debts.

Kimty says a “vicious cycle of high-interest indebtedness” is a major cause of the rural land loss that is accentuating Cambodia’s divide between rich and poor. He adds that once Cambodian borrowers are stuck in this cycle it is very difficult to escape, a problem that is compounded by inflation.
https://www.atimes.com/article/to-be-do ... -cambodia/

[Duncan]

To be down, out and in debt in Cambodia
The transition from a subsistence to consumer economy has resulted in rising household debts, growing inequality and waves of outward migration
By David Hutt, @davidhuttjourno Phnom Penh, September 14, 2018 6:24 PM (UTC+8)

Vattana San, 24, took out his first loan two years ago to purchase a new motorcycle. His parent’s farm, on the outskirts of Phnom Penh, the capital, was turning a profit and the new vehicle allowed him to travel more easily into the city, where he had just started a new service sector job.

But a bad harvest the following year meant his parents couldn’t afford to repay their debts, so he neglected his own loan to lend a helping hand.

Then one loan turned into two as his family’s financial situation deteriorated to an extent they were forced to sell the farm land that provided their livelihood and income to pay back lenders.

Vattana’s indebted family is not alone. Cambodia’s total household debt stood at US$2.9 billion in April 2018, compared to US$2.35 billion the same month last year, according to the CEIC, a US-based data research company that used National Bank of Cambodian data in its research.

A decade ago, when Cambodia was still largely a subsistence economy, total household debt was only US$200 million. Recent fast growth, with the economy projected to grow 7.2% this year, has come with more debts as Cambodians enter a more consumption-driven modern economy.

Kimty Seng, a local economics lecturer, says he is concerned that if borrowers don’t soon change the ways they use their loans it will threaten the entire financial system.

Analysts say that many borrowers take loans for non-productive purposes, such as purchasing vehicles and consumer items, or simply to pay off other debts. Few borrowers, they say, put their loans towards investments that can boost their future incomes.

As many fail to raise more capital from their borrowings, they then struggle to meet repayment schedules and eventually default. In other cases, borrowers take out additional loans from other creditors to repay their original debts.

Kimty says a “vicious cycle of high-interest indebtedness” is a major cause of the rural land loss that is accentuating Cambodia’s divide between rich and poor. He adds that once Cambodian borrowers are stuck in this cycle it is very difficult to escape, a problem that is compounded by inflation.
https://www.atimes.com/article/to-be-do ... -cambodia/

Quote ,]

Cambodian borrowers are stuck in this cycle it is very difficult to escape, a problem that is compounded by inflation.



No mention of the Fees for arranging loans and fees for selling the family land very cheap and the high interest rates charged.

[Arget]

Much like the sept 15 issue 2008, the lending to people with little or no ability to pay back the loan is undermining the community by having families default and lose farms and houses while the micro finance mob reap all rewards.

This poverty trap will usher in a lower level of poor in Cambodia.

[bolueeleh]

Much like the sept 15 issue 2008, the lending to people with little or no ability to pay back the loan is undermining the community by having families default and lose farms and houses while the micro finance mob reap all rewards.

This poverty trap will usher in a lower level of poor in Cambodia.

that is not entirely true, micros or banks who do due diligence with reasonable interest rates n sensible repayment schedule will help elevate poverty than caused it, thank you

[taabarang]

It happens all too often in our village. Cambodian values lend themselves to the old American "keeping up with the Jones" syndrome. The family rice plot is sold for next to nothing for a new moto, color TV or karaoke machine. Not long afterwards mom and dad discover they no longer have the means to break even and borrow from a credit union or local Shylock, plunging themselves further in debt and eventually lose the house. Then it's off to Thailand and any non productive kids are left with relatives. Parents go broke and families get broken. The Cambodia I fell in love with no longer exists.

[Duncan]

It happens all too often in our village. Cambodian values lend themselves to the old American "keeping up with the Jones" syndrome. The family rice plot is sold for next to nothing for a new moto, color TV or karaoke machine. Not long afterwards mom and dad discover they no longer have the means to break even and borrow from a credit union or local Shylock, plunging themselves further in debt and eventually lose the house. Then it's off to Thailand and any non productive kids are left with relatives. Parents go broke and families get broken.

The Cambodia I fell in love with no longer exists.

Cambodia,,,, Don't fall in love with her.
Like the spoilt child she is, she will not be happy till she destroys herself from within and breaks your heart.

[bangkokhooker]

There’s a big difference between authorized loans from MiFi and village loan sharks.
MiFi do not want to take land. That’s not a very good business model.

Think about it.

[kocdim]

https://www.ceicdata.com/datapage/chart ... 01&lang=en

[taabarang]

There’s a big difference between authorized loans from MiFi and village loan sharks.
MiFi do not want to take land. That’s not a very good business model.

Think about it.
[/quote

The hell they don't ! You don't have any extensivre experience in rural Cambodia to even pretend to even merit a right to ill informed pontification.

[bangkokhooker]

There’s a big difference between authorized loans from MiFi and village loan sharks.
MiFi do not want to take land. That’s not a very good business model.

Think about it.

g

The hell they don't ! You don't have any extensivr experience in rural Cambodia to even pretend to even merit a right to ill informed pontification.

Oh the irony.