Will Move to Cap Microfinance Interest Rates Backfire in Cambodia?
The ruling CPP doubled down on its decision to cap interest rates on microfinance loans as a way to help the poor get out of debt, even as analysts called it a political move that would have long-term negative effects on the rural economy.
With the new policy, CPP spokesman Sok Eysan said the ruling party and the government were putting people’s livelihoods over microfinance institutions’ (MFIs) profit margins.
“When the borrowers can’t pay back the money, the debt increases cumulatively and leads to the MFI taking away their land and home,” Mr. Eysan said.
Others, however, said the move was one of electoral expediency in the months before the June 4 commune polls that was unlikely to help reduce poverty, and could throw the country’s microfinance system into disarray.