An “alarming” number of Cambodians have had to sell their homes to pay off credit cards and small loans, a study of Cambodia’s microfinance sector has found.
The study, commissioned by the German government’s Federal Ministry for Economic Cooperation and Development (BMZ), interviewed households, held focus group discussions with villagers and interviewed local authorities in 24 Cambodian villages.
He found that many indebted households had taken out small loans at an interest rate of 18% and about half were struggling to repay.
Of the households that reported difficulties, 13% said they had sold their home in the past five years. When extrapolated to the entire population of borrowers in the country, “[this] this would mean 33,480 debt land sales per year, or about one sale every 16 minutes,” the study says.
Some borrowers tried to reduce their debt burden by eating less, and others took their children out of school so they could work to help pay off family debt, the report said. In rare cases, borrowers suffered from food insecurity or were forced to work in inhumane conditions, or made their children work to such an extent that it constituted human rights violations, he said. he declares.
The study shows the challenges faced by Cambodians who borrow money, Eang Vuthy, executive director in Phnom Penh NGO Equitable Cambodiatold the Khmer service of RFA.
“When [the microfinance institution] holds land and property titles, they charge an interest rate that does not reflect each family’s ability to earn income each month,” he said. “They look at the interest rate based on the value of the land.”
He urged the government and microfinance companies to write off the debts of the poor who have no hope of ever earning enough money to repay them.
“It’s a financial crisis. We need to have a national policy to give people time to pay off their debts rather than forcing them to pay or confiscate their land,” he said.
RFA could not reach National Bank of Cambodia director Chea Serey for comment.
In Channy, president of local bank Acleda, told RFA that the 18% interest rate is relatively low compared to rates charged by credit companies in other countries.
Acleda makes loans based on its assessment of a potential borrower’s eligibility, but sometimes people lie in their loan application forms while others abuse loans, he said.
“There shouldn’t be clients who lose their land because they take out loans, unless they abuse it,” In Channy said.
Kaing Tongngy of the Cambodian Microfinance Association said Cambodians sold their homes to raise capital for their businesses or because they wanted to move, not because they couldn’t repay their loans.
However, Kaing Tongngy said some loan officers are unscrupulous and his institution will provide more training for loan officers. Debtors should discuss their situation with their lenders if they cannot repay their loans, he said.
“Microfinance companies see people as clients. People have the right to ask and negotiate,” Kaing Tongngy said. “We urge people to talk about finding solutions to reduce tensions”
forced to sell
Sources in the country told RFA that they had no other way to pay off their debts than to sell their houses.
Vann Voeun from Kampong Speu province said he and his brother sold their houses to pay off debt they owed in 2019. He said their creditors would not allow them to make late payments and threatened to confiscate their properties, so he sold their land and cows to pay interest on time.
“The most delay they could give us was only a week or else they threatened to seize the properties. We were scared so we borrowed more money from the neighbors even though they were charging more interest “, did he declare.
He said he did not abuse the loan but his business failed. He said the loan led to his brother’s divorce.
“A micro-financier threatened me. I rushed to sell my land. The land should have been sold for US$20,000, but I sold it for only US$10,000,” Vann Voeun said.
In Banteay Meanchey province, Prin Chhoy sold two lots of his land to pay off his debt. She no longer has her home, but instead lives in a small shelter on her farm. She said her child dropped out of school because the debt got too high.
On RFA Khmer Service’s phone program on Friday, Sok Meng from Takeo province said he took out a $20,000 loan to start a business, but was unable to generate enough money to repay the bank.
“I bought supplies for my business, but I’m not making any profit,” he said. “My business is not working. I can’t earn income because of inflation. It’s hard to live, I win 20 dollars [each day], it is difficult to repay the loan. I spend more than I can earn in income. I will sell my business and sell my land. Things are so difficult.
Translated by Samean Yun. Written in English by Eugene Whong.