Cambodia , Oct 10, 2024
Cambodia’s booming microfinance sector is facing growing criticism for predatory lending practices, especially targeting vulnerable rural communities. Multiple investigations and NGO reports reveal that some microfinance institutions (MFIs) are charging exorbitant interest rates and imposing harsh penalties on borrowers who struggle to repay loans.
Borrowers interviewed in rural provinces describe how they have fallen into cycles of debt, forced to sell assets or take out new loans just to meet repayments. “I took a small loan to start a farm, but the interest kept piling up,” said Sokha, a farmer from Kampong Cham. “Now I owe more than I borrowed.”
The Cambodian Microfinance Association insists most MFIs follow ethical guidelines, but critics argue regulation is weak and enforcement inconsistent. Transparency issues further complicate the picture, with many borrowers unaware of full loan terms.
In response, the government has pledged to strengthen oversight and introduce caps on interest rates. The Ministry of Economy and Finance is also working with international donors to improve borrower protection and financial literacy.
Donor agencies emphasize the importance of responsible microfinance in reducing poverty but warn that abusive lending risks undermining social stability. “We support microfinance but not at the cost of borrower exploitation,” said a representative from the World Bank.
Efforts are also underway to promote digital lending platforms that offer clearer terms and reduce costs. However, rural connectivity remains a barrier.
As Cambodia’s economy grows, the sector’s sustainability hinges on balancing access to credit with safeguards against exploitation. NGOs are calling for greater accountability and more inclusive financial products tailored to the needs of rural communities.
