Microcredit in Cambodia: Why is There So Much Support for a Failed Poverty Reduction Model?
ISEAS Perspective, No, 134, 2020
10 Pages Posted: 23 Dec 2020
Date Written: November 25, 2020
Cambodia’s microcredit sector – the world’s largest (in per capita terms) and most profitable – has created a raft of negative economic and social phenomena that are increasingly undermining the functioning of the economy and cohesiveness of society. Three especially damaging trajectories associated with Cambodia’s microcredit sector are: (1) a ‘no-growth’ low productivity economic structure built on an ‘extractivist’ logic; (2) reckless lending strategies that have created dangerous levels of over-indebtedness in the poorest communities; and (3) the widespread use of land titles as collateral which has inevitably led to the growing loss of land by the poor through coerced informal sales. The COVID-19 pandemic may require the government to bail-out struggling microcredit institutions in Cambodia. A logical, pro-poor way forward would be to make such bail-outs conditional upon an agreed conversion of existing privately/foreign owned microcredit institutions into local community-owned and controlled financial ones. Debt-for-equity swaps would be one way to achieve this goal.
Keywords: Cambodia, microcredit, COVID-19, development, over-indebtedness, productivity
JEL Classification: G01,G23, Q01, Q15
Suggested Citation: Suggested Citation