Thursday
April 30
2020

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)

Categories
Coronavirus, Finance
Tags
coronavirus, debt, emerging markets, financial services, microfinance, microloans, poverty