Cambodian Workers Owe $10 Billion in Microfinance Debt as COVID-19 Wipes Out Incomes
By Skylar Lindsay
From health care systems to income and poverty, the COVID-19 crisis is highlighting deep inequalities across Southeast Asia. In Cambodia, the economic slowdown has derailed the garment industry, which employs over 800,000 workers in a country of 16 million. Due to declining demand, over half of the country’s garment factories will likely close by the end of April.
With many Cambodians out of work, COVID-19 is also throwing another problem into sharp relief: that of precariously high microfinance debt. Cambodia has the highest microloan debt per borrower in the world at around US$3,800, almost twice the country’s GDP per capita. Over 2.6 million Cambodians currently hold microfinance loans, collectively worth a total of over $10 billion, according to the Cambodia Microfinance Association. These numbers don’t include widespread informal lending.
As Cambodian workers are left out of jobs with minimal government assistance, this debt has become a major concern. Four out of five garment workers hold a microfinance loan. For many families, loan payments now represent a threat to their future, their savings and even their land. The impacts of overwhelming debt are also starkly gendered: women are traditionally in charge of household finances in Cambodia and around 75% of microfinance clients in the country are women.
Photo courtesy of aaron gilson.
Source: ASEAN Today (link opens in a new window)
- Coronavirus, Finance