On March 13, the National Bank of Cambodia (NBC) announced that it will cap interest rates on microfinance loans at 18 percent per year starting April 1 in order to help growing numbers of Cambodians struggling with over-indebtedness. After this announcement, leaders and experts of the microfinance industry responded that this government intervention is merely a political gesture that will backfire and hurt the rural poor even more.
Citing an economic researcher at the NBC, they argued that many small microfinance institutions (MFIs) will not be able to afford their high operating costs if the government imposes an interest rate cap. These MFIs will be forced to reduce their services and potentially stop providing the rural poor with the small loans that they rely upon for basic needs like health care and food. These borrowers will have no other option but to seek out loans from unregulated local moneylenders, which will further drive them into debt and poverty.
By: Kundhavi Kadiresan
Many people reading this have, most likely, never personally experienced real chronic hunger. And, as the author, I will admit neither have I. I fondly recall my first visit to Cambodia as a tourist. It was a family holiday and we went to Siem Reap. It seems like a lifetime ago, long before I joined the Food and Agriculture Organization of the United Nations (FAO), and while I do recall noticing that some people were poor, I now wonder if I had also realised that some people were undernourished. Back then, I don’t think I had.
By: Heng Pheakdey
Due to rapid economic growth in the last decade, Cambodia’s poverty rate has dropped dramatically from more than 50% in 2004 to just 19% in 2013. However, it should be noted Cambodia’s economic success has been a largely urban phenomenon.
Disclaimer: All views expressed here belong to their respective author and do not represent the views of Enrich Institute