Cambodia’s credit boom: A blessing but also a curse
Kuong Chhuon’s village is doing better than it was five years ago. Incomes have doubled due to the opening of nearby factories, but villagers also have something many rural people around the world lack: Access to credit. The villagers borrow money to buy fertiliser, rebuild their homes and expand their businesses, said Kuong Chhuon, the village headman. “If they have small businesses, they borrow around $1,000 to $2,000. But for those who have big businesses, they borrow up to $10,000,” the 68-year-old said.
These microloans, known collectively as microcredit, are often issued to groups or to several members of the same family.
Around three-fifths of the 226 families in Prech village, in the country’s south-west Takeo Province, have taken out microloans, Chhuon said.
He can name a half-dozen microcredit institutions active in the area, saying that they all come to see him and ask about potential customers.
The village, despite its humble surroundings of dirt roads and rice paddies, is in the middle of one of the most competitive microcredit districts in Cambodia, which itself is one of the largest markets for microloans in the world.
Cambodia’s microcredit market is second in size only to according to Symbiotics, an international social investment firm.
In fact, at 4.4 billion dollars, Cambodia’s microloans market makes up 9.7 per cent of the global microcredit industry.
Today, nearly one in five adult Cambodians has such a loan, according to Microfinance Index of Market Outreach and Saturation (MIMOSA), an independent research group.
Although it’s a good way to get businesses started, industry insiders are starting to question whether Cambodians are taking on too much debt, a situation that has led to political and economic crises in other large microcredit markets, like India.
More than 80 people committed suicide in Andhra Pradesh in southeastern India in 2010 allegedly related to stress over their microloan debt. The crisis led to a backlash against the industry, as people asked whether it was adhering to its original humanitarian principles.
Founded in 1970s Bangladesh as a way to alleviate poverty, microcredit traditionally provides loans to the poor, or people who cannot borrow from a bank, in order to start a business or buy agricultural equipment.
In Cambodia, where the economy was obliterated by decades of war, microcredit lenders helped recreate the banking industry after Cambodia returned to democracy in 1993. India’s,