Cambodia Has a Big Problem With Small Loans

Thursday, October 4, 2018

By Philip Heijmans

As the sun rises beyond the Mekong River over the village of Ta Skor near Cambodia’s capital, 60-year-old farmer Sophal and his wife are hard at work trying to revive their flood-damaged corn crop.

Sophal said his harvest was once the lifeblood of his family, providing them with enough food and income to survive, but after a few bad years he began taking out small loans from various microfinance institutions (MFIs) to cover his losses. Now, he doesn’t know if he will ever clear the debt of $2,000.

“This month again has been hard because there is a lot of flooding in the farm and now I will not have the money to pay back my loans,” said Sophal, his shirt drenched in sweat. Without the help of his friends and a son who works across the river in Phnom Penh, he could lose everything.

Stories like that of Sophal, who only gave his first name, are now common in a country where an ever-expanding field of MFIs and loan sharks jockey for business among millions of poor Cambodians, pushing household debt to an all-time high. Economists worry that at best the debt could put the brakes on economic growth, and at worst could fuel social unrest as inequality rises.

Photo courtesy of Chhor Sokunthea.

Source: Bloomberg (link opens in a new window)