MICROCAPITAL BRIEF: Microfinance in Cambodia Grows 10%, Described as “Trap”

Mr Simon Marks from the Asia Sentinel, a website based in Hong Kong, recently cited data collected by the Cambodian Microfinance Association (CMA), a network of microfinance industry officials in Cambodia, indicating that as of the end of the first quarter of 2011, total loans outstanding from its members amounted to approximately USD 712 million, which represents an increase of nearly 10 percent over the last quarter of 2010 [1]. The number of borrowers served stands at approximately 1 million out of a population of 14 million people. Mr Marks also offers anecdotal evidence of clients who have simultaneously taken loans from more than one lender and subsequently have been unable to successfully make their repayments. Although nonperforming loans among licensed institutions were calculated by CMA to be 0.99 percent in the first three months of 2011, it is difficult to affirm if these figures are indicative of the broader microfinance sector, which also includes nonprofit organizations and private moneylenders.

Solutions that have been proposed to combat over-indebtedness include training MFI staff to examine borrower qualifications more closely and the installation of a credit bureau, which is reportedly due to be launched by the end of 2011 [2]. In addition, the National Bank of Cambodia (NBC), the country’s central banking authority, announced plans to designate a chapter in its financial sector development strategy for 2011 to 2012 on how to safeguard the microfinance industry. Specifically, NBC intends to encourage MFIs to inform borrowers on the benefits of borrowing from formal lenders rather than private moneylenders.

By Jacqueline Foelster, Research Associate

About Cambodian Microfinance Association (CMA): The Cambodian Microfinance Association (CMA) is an NGO that was formally established in 2004 by seven microfinance institutions (MFIs). According to its website, as of May 26, 2011, CMA now has 26 active members. Its main function is to strengthen communication between MFIs and other groups such as government authorities, donors, creditors and investors.

About National Bank of Cambodia: Established in 1954, the National Bank of Cambodia (NBC) is the country’s central bank. Among its functions, the NBC establishes and monitors the country’s monetary policy, supervises and regulates the country’s financial sector and issues the country’s currency.

Source and Additional Resources:

[1] Asia Sentinel, “Cambodia’s Micro-credit Trap”, http://www.asiasentinel.com/index.php?option=com_content&task=view&id=3206&Itemid=221

[2] MicroCapital.org Brief, May 10, 2011, “National Bank of Cambodia (NBC), Supported by International Finance Corporation (IFC), Targets Multiple Borrowing by Microfinance Clients, Expects to Launch National Credit Bureau in 2011”, https://www.microcapital.org/microcapital-brief-national-bank-of-cambodia-nbc-supported-by-international-finance-corporation-ifc-targets-multiple-borrowing-by-microfinance-clients-expects-to-launch-national-credit-bureau-2/

MicroCapital Paper Wrap-Up, February 2, 2011, “Over-Indebtedness and Microfinance: Constructing an Early Warning Index; by Vivien Kappel, Annette Krauss and Laura Lontzek; published by Center for Microfinance, University of Zurich, responsAbility Social Investments AG, Triodos Bank and Council of Microfinance Equity Funds”, https://www.microcapital.org/microcapital-paper-wrap-up-over-indebtedness-and-microfinance-constructing-an-early-warning-index-by-vivien-kappel-annette-krauss-and-laura-lontzek-published-by-center-for-microfinance-universit/

MicroCapital Universe Profile: Cambodian Microfinance Association (CMA), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Cambodian+Microfinance+Association+%28CMA%29

MicroCapital Universe Profile: National Bank of Cambodia (NBC), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=National+Bank+of+Cambodia+%28NBC%29

Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/

Similar Posts: