Microfinance institutions in Cambodia are experiencing reduced lending capacity due to market turbulence in the United States and the European Union. The Cambodia Microfinance Association had set a target for reaching customers, however lower foreign investments will result in a 20 percent reduction in their anticipated fulfilment of customer credit needs.

Hout Ieng Tong, chairman of the Cambodia Microfinance Association told The Phnom Penh Post that although targets would not be met, steady loan payments will contribute to the partial funding of new loans, despite international financial problems. Officials from Amret Ltd., a non-bank financial institution, Prasac Microfinance Institution, a microfinance institution specializing in rural Cambodia, and Cambodian Entrepreneur Building, an MFI, have agreed that all microfinance institutions in Cambodia are facing similar problems finding money, making planned expansions in the microfinance market increasingly difficult. Kang Chandararot, an independent economist and director of the Cambodia Institute of Development Study stated that while the economic downturn in the United States and the European Union will not likely impact aid, microfinance institutions will experience the impacts as they will have a harder time supporting borrowers.

Experts from the Rural Development Bank and the Cambodia Institute for Development Study suggested that lending challenges will create an additional strain to the economy as consumers struggle with rising inflation. This comes just a few weeks after economists and government officials asserted that the smooth change in government would provide the necessary framework for sustained economic growth and stronger foreign direct investment.

The Cambodia Microfinance Association is a trade association established in 2004 by seven microfinance institutions (MFIs) that initially met in 2002 with the purpose of setting up an organizational and governing structure to “ensure the prosperity and sustainability of [the] microfinance sector in Cambodia”

By Lori Curtis, Research Assistant