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| Recipient of an agricultural microloan through lendwithcare © CARE/Nancy Thomas |
The last time I visited Cambodia was in 2005 and as I walked
out into the humid night air and towards Phnom Penh’s visibly transforming
skyline, I was eager to find out how Cambodia had changed since my last visit.
This time I was not visiting Cambodia as a tourist but on behalf of CARE International UK, and lendwithcare. And before I had even
reached my hotel in the heart of Phnom Penh I was struck by aspects of this
rapidly developing country that I did not see (or at least notice) when I
visited in 2005. Three particular aspects stood out to me over the next few
days: Firstly, there are a lot of non-governmental organisations (NGOs) working
in Cambodia (in fact there are 3,000 NGOs currently registered with the
Ministry of the Interior); secondly, a growing economy has led to increased
migration to the cities, especially to find work in one of the growing number
of garment factories (predominantly owned by South Korean and Chinese
companies) on the outskirts of Phnom Penh; and thirdly, the microfinance
sector has undergone very rapid growth.
My first observation should have been expected. Years of war
and internal conflict made it impossible for Cambodia to take part in the
economic development experienced by many of its neighbours towards the end of
the 20th Century and when the fighting did eventually stop in 1991, Cambodia
and its people were left war-torn and devastated. Over the last two decades this has started to
change and in recent years, as my second observation indicates, some powerful regional
investors have started to play for big stakes in Cambodia’s economy. In fact South
Korea, China and Japan invested a combined $762.6m in Cambodia last year,
representing 33% of total foreign investment, and all three replacing the UK as
Cambodia’s largest foreign investor.[1]
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| A Village Savings and Loans Group in Koh Kong Province (CARE Cambodia) © CARE/Nancy Thomas |
Despite this growth, Cambodia remains one of Asia’s poorest
countries (57.8% of the population live on less than $2 a day) and social development
has not managed to keep pace with economic. When I met with the CARE country
office in Phnom Penh they explained that development has been concentrated in
Cambodia and has resulted in ‘increasing inequality between urban and rural
areas, between rich and poor and for socially excluded groups … and the
disparities in health, education and employment opportunities between different
areas of the country and between different population groups, remains
substantial.’ All of which provides an understandable context to the large
number of NGOs I observed working in Cambodia. Also, I quickly discovered that this
disproportionately high number of registered NGOs is actually misleading since
a lot are inactive and have ceased (or never in fact started) operations.
My second and third observations were equally predictable.
After all, it would be unusual to visit a developing country today without sharing
the experience with a businessman from China or stumbling across the branch of
some local microfinance institution. However, when I visited Cambodia this
time, I was quite surprised by the speed with which both had come to dominate
Cambodia’s economic landscape. The growth of the latter is particularly
important to me since microfinance, and providing fair and effective financial
services to the poor, is a key part of CARE’s work and I was eager to find out
what impact this influx was having on the poor. The well-publicised cases of
aggressive money lending practices in India and the devastating over-indebtedness
this contributed to undoubtedly springs to mind when you think of market saturation
of microfinance.
Unsurprisingly the growth of the Cambodian microfinance
sector matches that of Cambodia’s overall economic growth over the last couple
of decades. Emerging from a virtually non-existent financial sector in the
early 90s as part of NGO-led programmes on financial inclusion, microfinance in
Cambodia has subsequently developed into a much more sophisticated and
commercialised machine. There are now 39 microfinance institutions operating in
Cambodia, providing over 1.3 million people (9.2% of the population) with an
array of financial and non-financial products and services. And in keeping with the raison d’etre of
microfinance, these institutions predominantly serve those who typically live
outside the formal financial sector - namely women (81%) and people living in
rural areas (80%).[2]
However, like in India, Cambodia’s fast-growing microfinance sector faces some
serious problems. Perhaps the two most worrying of which are: the prevalence of
multiple lending and the lack of product diversification (i.e. credit is the
main product offered by most MFIs).
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| Community Based Microfinance Organisation (CBMIFO) of CCSF in Takream © CARE/Nancy Thomas |
So when I met with our microfinance partner in the
north-west province of Battambang - although reassured by the fact that CARE
very carefully select the institutions with which they work - I was understandably worried about how this
rapidly changing sector had impacted on their operations. The Cambodian
Community Savings Federation (CCSF)
has been involved in providing essential financial services to the poor pretty
much since the birth of microfinance in Cambodia. Set-up in 1998 as a Small
Economic and Development project of CARE Cambodia, CCSF looked set to mimic the
growth of the microfinance sector in general as it registered as a rural credit
provider (independently of CARE) in 2003 and expanded operations. However,
there are three specific qualities about CCSF that have meant it has not
developed into a commercial institution but stayed true to its principles of
trying to provide fair and effective financial services to the very poor. These
qualities are:
1. CCSF is a credit
union and therefore not driven by a need to generate profits for shareholders
2. As is suggested by the name, CCSF is primarily a provider
of savings products for its members (1 of only 4 microfinance providers in
Cambodia able to deposit savings) and provides a diverse range of products,
which are tailored to suit the communities they serve.
3. In the last 10 years instead of expanding operations
quickly across the whole of the country (as many of its competitors have done),
CCSF has remained focussed on serving the rural populations of North-West Cambodia.
Not only allowing them to expand into more remote and underserved communities
but also to know the communities and their financial practices well enough to
meet their needs adequately.
It is these qualities, I believe, that have enabled CCSF to
remain true to their mission of providing affordable financial and
non-financial services to the poor over the last 10 years and avoid becoming involved
in some of the harmful practices we know only so well.
As I left Cambodia two weeks later, laden down with gifts
made by children and women supported by various fabulous NGOs and boarded a
plane full of Chinese and South Korean tourists, I reflected on how much things
had changed in the eight years since my last visit. I also felt a renewed sense
of pride about the microfinance institutions we support through
lendwithcare. The time I was lucky enough to spend with CCSF and their
clients reminded me that despite a certain loss of faith by some in
microfinance, there are a lot of really good providers of microfinance out
there (even in saturated markets) and it is our duty to the poor, to make sure
those good ones survive.
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| Lendwithcare entrepreneur, Sea, with her family © CARE/Nancy Thomas |
By Nancy Thomas, Lendwithcare.org Executive
Every year lendwithcare visits each of its existing microfinance partners in country to monitor the progress of entrepreneurs funded through lendwithcare and to conduct an evaluation of the microfinance institution's (MFI) operations. This trip was part of our annual evaluation of our partner in Cambodia, CCSF.
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