Can policy-makers promote both economic empowerment and social capital among the poor in developing countries? To answer this question, the impact of a World Bank program that established self-help groups in Cambodian villages on households’ economic welfare and social capital a World Bank sponsored pilot of a self-help-group program in Siem Reap, Cambodia was studied. Self-help groups (SHGs) are “village-based organizations that focus on building the savings and credit as well as social empowerment of their (mostly female) members” and provide scope for mutual, economic assistance. SHGs differ from traditional microfinance groups in that they rely on no external financing. Members of the SHG pool their own savings and loan it to members of the group according to specified rules. Self-help groups have been found to benefit consumption and assets accumulation and improve food security, consumption smoothing and saving. They may be used as a commitment device, or a peer-pressure instrument to increase precautionary savings. Siem Reap, Cambodia is best known as the location of Cambodia’s majestic Angkor Wat temple. Over three million tourists travel to Siem Reap each year to see the temple, and as a result the area around the temple including the town of Siem Reap has experienced explosive economic growth. The economic impact of this growth has not extended beyond a few miles from Angkor Wat however. Jobs in the tourism sector require literacy and some ability to speak English and as such are unavailable to the poorest members of Siem Reap province. In a 2008 study, 14 percent of Siem Reap province residents were classified as very poor (ID Poor 1) and another 15 percent were classified as poor (ID Poor 2) despite the increase in tourism to Angkor Wat temple. Siem Reap province’s rural poverty is readily apparent by casual observation a few miles outside of the Angkor Wat tourist region. To address this persistent poverty in the rural areas of Siem Reap, the Cambodian government and the World Bank launched LEAP as a pilot project. LEAP was designed to meet three broad pro-poor objectives. These were captured by the three program components:
3. to build and strengthen SHGs among the poor to serve as intermediaries with the state and with lending institutions, to provide the poor with better access to finance and to forge better links between poor producers and important markets and value chains. The program hoped that through these activities the villages would accumulate social capital which would in turn strengthen villagers’ trust, trustworthiness and capacity for collective action in pursuing these goals. Individual SHG members were instructed on how to increase savings and make and obtain loans. They also received information on gender mainstreaming and training on agricultural techniques. The SHGs were closely monitored to ensure regular and well attended meetings, steady saving and lending, adherence to internal group rules, as well as proper bookkeeping. All SHGs were officially registered with the commune council. Each SHG also underwent an extensive performance rating and received overall performance scores. As part of the second component, all SHGs opened formal bank accounts and received seed grants to kickstart activities. The third component involved the establishment of producer groups, the provision of livelihoods training (e. g. home gardening, chicken-raising), as well as the promotion of market linkage of producer groups. The LEAP pilot, which began in July 2010, led to the following outputs (see LEAP, 2012): To improve the social institutions of the poor, LEAP created 100 self-help groups containing 1,291 household members, 99 percent of whom were classified as poor by the Cambodian government and 90 percent of whom were women. To encourage savings and access to credit all 100 SHGs had bank accounts at major commercial banks.