I used to struggle a lot before joining the microfinance project

A SMALL community in Kampot province is one of thousands in the Kingdom using its own savings to fund microfinance loans to members in need.

Twenty people in the village of Trapaing Tnoat, in Kampot’s Angkor Chey district, met this week to collect modest cash deposits for a communal savings fund. The group members, most of them women, then decided collectively how the money would be distributed in the coming week.

Throughout Cambodia, approximately 4,380 community groups host similar meetings as part of a savings-led microfinance program pioneered by Oxfam and various local NGO partners, including CARE and PACT Cambodia.  

“This project is based on the idea that even the nation’s poorest need access to finance,” said Soleak Seang, Oxfam’s regional communications officer.  

The project, dubbed Savings for Change, teaches people in impoverished rural communities to form small savings cooperatives, pooling their money and disbursing small loans to “address needs and emergencies,” he said.  

Regular meetings are held at which members collect savings, pay back old loans with interest and apportion new loans to individual community participants, he added. Introduced to the Kingdom in 2005, the project now has 71,450 participants in 16 provinces.

“By the end of June 2012, the plan is to have 110,000 members,” said Savings for Change project officer Vanndeth Seng.   

Traditional microfinance schemes often experience difficulty reaching the poorest rural demographic, requiring that clients pay collateral costs and high interest rates, said Oxfam’s Soleak Seang.  

“The savings-led model is a very simple way of borrowing and saving,” he said, adding, “[Members] don’t need to pay collateral, and interest collected on loans comes back to the group instead of going to fund an external microfinance firm.”

Chuon Bopheap, 35, is the group’s cashier, responsible for counting the money saved each week and depositing it all in a red lockbox she keeps in her home.

So far she has taken out two loans of US$25 each, using some of the money to start a small business selling traditional Vietnamese pancakes.

“My daily life is a little bit better. I used to struggle a lot before joining the microfinance project,” Chuon Bopheap said yesterday.

“If we didn’t join this group, we would have no savings left by the end of the year.”

The group’s leader, 49-year-old Sim Soung, said the group had saved $36 at yesterday’s meeting and almost $500 over the past two months.

After undergoing an eight-week training period with NGO Save Cambodia’s Wildlife, Oxfam’s community partner in the region, as well as several months of less frequent monitoring, Sim Soung’s group is now considered fully self-sustaining, Soleak Seang said. The project costs about $32 per person, with most of the money going toward conducting the initial training, he said.

According to an Oxfam document from February 2009, the savings-led model has been criticized for “doing little to encourage transformative change,” instead acting simply to mitigate poverty.

Soleak Seang countered by saying the benefits of the model are apparent given how quickly it is spreading.

“For people, seeing is believing,” he said. “When [people] see their neighbours building up their livelihoods through savings-led loaning, other community members are eager to participate.”

Since the inception of Sim Soung’s community savings group in June 2010, Trapaing Tnoat village has seen the creation of four more groups, each with about 20 members.