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Flood-affected poor ‘drowning in debt’

The curse of Cambodia’s 2011 floods continues for those most affected, as they fall deeper into debt from unsustainable cyclical debt practices, a consortium of international NGOs said yesterday.

The consortium of Care, Oxfam, Pact and Catholic Relief Services released the results of their January survey yesterday which show that flood-affected poor are now “drowning in debt”, coalition representatives said.

Bill Penington of Care said the cycle of debt is exacerbated when people take out multiple loans and use informal loans to pay back formal loans.

“Debt is a growing issue that needs to be addressed,” Pennington said.

“What we don’t want to see is a situation where poor families are in a cycle of debt, where they use new loans just to pay off existing borrowings or simply to buy food – yet, unfortunately, we are seeing that happening now,” Pennington said in the consortium’s press release yesterday.

The survey, conducted in Prey Veng, Kampong Thom and Kandal provinces – the three most heavily affected by the flooding – found that 71 percent of households already lived on or below the Cambodian food poverty line and more than three quarters of landholders experienced 80 percent crop damage from the floods, thereby further impacting their income-generating capacity.

“Forty-eight percent of households interviewed have taken out new loans as a result of the 2011 flood event,” the survey found.

“This indicates the high level of impact the flood had on affected rural communities.”

The survey also found the 2011 floods had a significant impact on the ability of people to repay their existing debt.

Sixty percent of households reported they would have some level of difficulty repaying their primary loan and nine percent said they could see no way to repay their debt.

Prime Minister Hun Sen will meet with Ministry of Finance and microfinance industry representatives today to discuss solutions to the developing debt crisis of Cambodia’s rural poor.

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