During the last 35 years Cambodia has been plagued by civil wars and changes in political leadership. This turmoil has affected all areas of the country’s social and economic infrastructure, including that of the banking industry.
As most Cambodian families live at a subsistence level they lack the cash flow to meet basic human needs such as health care, children's education and resources to secure adequate food. Almost every one in four households are female-led and usually include at least two children. These families are particularly vulnerable, as the women generally have little or no formal education, and no land or productive assets.
The poor’s vulnerability to financial shocks or the sudden need for large, unexpected outlays of funds is one of the core aspects of poverty.¹ In Cambodia, there are presently about <30> commercial banks, <mostly> limited to servicing larger businesses in the urban areas. Many of the poor, especially in remote villages, rely more on traditional sources of credit such as family and friends, employers, merchants and village moneylenders who charge up to 10-20% in interest per month. These high interest rates charged by local moneylenders can make loans very expensive and some of the poor families cannot pay back the money borrowed. Instead they are often forced to pay in other ways, such as:
* taking their children out of school to go work for the moneylenders
* giving their children away to repay their debt, or
* selling their homes and land.
It is estimated that only 12% of the population has access to formal and semi-formal sources of credit provided through some 83 NGOs (Non Government Organizations) and semi-formal financial institutions, including VisionFund Cambodia. Meanwhile, market demand for microfinance is estimated to be US$100-125 million.² In addition there are virtually no micro savings services available to encourage poor families to build their own asset base for responding to family emergencies or external shocks such as natural disasters.
It is expected that the number of microfinance institutions (MFIs) in Cambodia will continue to grow, fueling more competition. This competition will ensure that banks and MFIs will continuously develop their products and services to adequately meet the needs of the poor.
¹World Development Report 2000/1 (updates/inserts shown in < > )
²National Bank of Cambodia December 2005