Tiny Loans Lead to Bigger Debts, Land Losses in Cambodia

[geovalin]

BANGKOK - The rapid rise of tiny loans aimed at helping poor Cambodians has led to more debt, with many borrowers forced to sell land, migrate or put their children to work, human rights groups said on Wednesday.

 

The Southeast Asian nation has about 2.4 million borrowers with $5.4 billion in outstanding microloans, and among the world's biggest average loan sizes, according to a report from human rights groups Licadho and Sahmakum Teang Tnaut (STT).

 

High interest rates, the use of land titles as collateral, and pressure to repay loans have led to a "predatory form of lending" by microfinance institutions (MFIs), they said.

 

"MFIs, as they currently operate, pose a direct threat to the land tenure security of millions of people in Cambodia," they said in the report. "In most cases, the land that was lost was income-generating. Loss of land therefore jeopardizes a family's livelihood and identity."

 

The National Bank of Cambodia did not respond to emails seeking comment.

An official at industry group the Cambodia Microfinance Association (CMA) said all members followed the law, as well as CMA's lending guidelines to check over-indebtedness.

 

"CMA and other stakeholders watch the growth in the sector carefully and take appropriate measures to ensure long-term sustainable growth," acting executive director Chea Saren said.

 

Microfinance took off in Cambodia in the 1990s as a way to provide easier access to credit for those left impoverished after decades of war, allowing many to purchase farming equipment or set up small businesses.

 

After the government introduced more formal microfinance policies in 2007, outstanding loans more than quadrupled to $1.3 billion in 2013 from just $300 million in 2009, data compiled by Licadho and STT showed.

 

At the end of 2018, average loan size was about $3,370, more than twice the country's gross domestic product per capita of $1,384 in 2017.

 

The World Bank, in a report earlier this year, warned of risks to the Cambodian economy from bigger microloans. In 2017, the United Nations said that "for many Cambodians, microfinance loans only serve to push borrowers further into poverty."

 

Cambodia imposed an annual interest-rate cap of 18 percent on MFIs in 2017. But that had proven "ineffective" in slowing credit growth, Licadho and STT said.

 

The impoverished Southeast Asian country of 16 million has struggled to establish land ownership since the deadly Khmer Rouge destroyed all property records to establish a form of communism in the 1970s.

 

Over the last two decades, the government has driven efforts to title land to help alleviate poverty.

About half of MFI loans in Cambodia are secured by land titles, according to Licadho and STT.

 

"Collateralised credit is most risky when it is given to people who are already at the margins of economic vulnerability," said Nathan Green at the University of Wisconsin who is researching microfinance in Cambodia.

 

"It is especially risky in Cambodia because the microfinance market is already saturated, and because there is almost no government oversight," he told the Thomson Reuters Foundation.

 

About 10-15% of land held by Cambodian farmers has been lost due to failure to repay microloans, according to Milford Bateman, a professor of development studies at Saint Mary's University in Canada, who has studied microfinance.

 

REUTERS --

[phycokiller]

I dont know whats going on but most of the women Ive been with get a call from their mother every few weeks and the daughter stresses out and takes drugs and goes and looks for customers. Ive often had the feeling that mama is about to get a beating if the loan payment doesnt come in but the girls dont want to discuss that. the daughters also were sent to work in brothels when they were 14, I believe there is a tradition going back hundreds of years in SE asia of loans been taken out on the daughters and this is how they pay them off, or pay part of them off. but I know for sure many of them pawn their phones and jewelry several times a month, and then often sell the paper on to someone else, then buy it all back. the pawn shops are getting half their incomes year in year out. They definitely have no idea of the mathematics involved, which is why I have no doubt about my suspicion that many of them are permanently in debt and have to pay the debt collectors for the rest of their lives or suffer beatings or death. this is all mainly the result of children not going to school and learning maths, without that there is no solution. There are three easy ways to make good money in SE asia, be a dictator, pawn shop owner or drug dealer

Edited August 8, 2019 by phycokiller

[Cereal]

I know a girl, she's 21, and her father got into debt with lenders to the princely sum of $900. Yep...$900 measly dollars. What did daddy do? He sent his daughter to "work" to make the money up.

[phycokiller]

2 hours ago, Cereal said:

I know a girl, she's 21, and her father got into debt with lenders to the princely sum of $900. Yep...$900 measly dollars. What did daddy do? He sent his daughter to "work" to make the money up.

she will work just enough to pay what they have to pay when the lender calls and makes his threats, but never enough to pay it off completely, so she will be working until her daughter is old enough to take over the loan repayments. oh, and daddy sends her off to bang khmers with no condoms at $5 a go when the lender calls but she cant work on a cam site because daddy might see her naked because while shes out making money he sits in the room watching porn on the phone one of her customers bought her. you can offer her $20 dollars to sweep your floor but she cant do that because daddy she has to go out and look for khmers to bang for $5 a shot. I guess Im not supposed to say this stuff but Ive witnessed it multiple times. you cant help these people

Edited August 9, 2019 by phycokiller

[tabarin]

30 minutes ago, phycokiller said:

she will work just enough to pay what they have to pay when the lender calls and makes his threats, but never enough to pay it off completely, so she will be working until her daughter is old enough to take over the loan repayments. oh, and daddy sends her off to bang khmers with no condoms at $5 a go when the lender calls but she cant work on a cam site because daddy might see her naked because while shes out making money he sits in the room watching porn on the phone one of her customers bought her. you can offer her $20 dollars to sweep your floor but she cant do that because daddy she has to go out and look for khmers to bang for $5 a shot. I guess Im not supposed to say this stuff but Ive witnessed it multiple times. you cant help these people

It is in most cases the reason they are hold back from getting on the road of 'success'.
They are supposed to listen to their parents, who know nothing of the modern world, aside of the idiotic status ego issue refusing them to do work other than told / studied.

Could be as horrible as you describe but even much better; people who were forced to study nursing, end up with a 500K education debt and a job that only pays around 15K average unless you are lucky to get a position in a private hospital. If they then can make double by doing business, the parents disagree as it is not what they studied (read my parents in law too --- Even it means she can now pay off the debt in 3 years only rather than 20 as bank suggests + interest).

They are not looking at the financial maths at all, just at the status of the job and that there should basically always be work within that profession. 
In terms of the old guy forcing the $5 dollar shots, it is his way of assurance in financial results, like offering 100 usd today or 1000 in a year, they pick 100.

Edited August 9, 2019 by tabarin

[phycokiller]

On 8/9/2019 at 2:27 PM, tabarin said:

It is in most cases the reason they are hold back from getting on the road of 'success'.
They are supposed to listen to their parents, who know nothing of the modern world, aside of the idiotic status ego issue refusing them to do work other than told / studied.

Could be as horrible as you describe but even much better; people who were forced to study nursing, end up with a 500K education debt and a job that only pays around 15K average unless you are lucky to get a position in a private hospital. If they then can make double by doing business, the parents disagree as it is not what they studied (read my parents in law too --- Even it means she can now pay off the debt in 3 years only rather than 20 as bank suggests + interest).

They are not looking at the financial maths at all, just at the status of the job and that there should basically always be work within that profession. 
In terms of the old guy forcing the $5 dollar shots, it is his way of assurance in financial results, like offering 100 usd today or 1000 in a year, they pick 100.

yeah, I know a few girls working for $5 that could easily get $50 from foreigners. Ive taken them to bars where they have had the offers so they know they could. but thats not what papa wants. its odd. I sometimes think its the hindu influence in cambodia, a caste system, where they simply think they cant do anything outside what they were born to do. also male domination. I know one girl whos khmer bf has vd. I can give her the antibiotics but not him so she cant get rid of it. so when she is in too much pain to work she goes out collecting plastic bottles and cans while he sits in the room saying its too hard to make money in cambodia, but she loves him so its all ok. one things for sure, you cant use rationality to explain the irrational.

 

just to add to that, theres plenty of cambodians that arent this stupid

Edited August 10, 2019 by phycokiller