Microfinancing has created as many as 2.5m jobs across Cambodia. The sector is also a big employer in its own right

Photo by: KAY KIMSONG

AMK CEO Paul Luchtenburg says every micro-loan extended immediately creates at least two new jobs.

LOANS from Cambodia's microfinance institutions (MFIs) have directly or indirectly created at least 1.8 million jobs nationwide and possibly as many as 2.5 million, according to industry estimates.

ACLEDA Bank was alone responsible for creating around 600,000 jobs, Chief Executive Officer In Channy told Work Week.

ACLEDA, which is now one of the country's largest commercial banks, began operations in 1993 offering credit to micro and small enterprises. It transformed itself into a commercial bank in October 2000 but is still one of the largest microfinance lenders in the country.

It has provided almost 400,000 loans, including more than 200,000 micro-loans, 130,000 small loans and 45,000 medium-sized loans, In Channy said.

Say Sony, marketing manager at Prassac Microfinance, said MFI lending had resulted in remarkable poverty reduction even in remote areas of Cambodia.

He estimated it had created at least one million jobs through lending to small and medium-sized businesses. "I think the role of MFI is to provide access to finance and create jobs," he said.

Prassac has issued US$57 million in loans to 98,000 families in 17 provinces.

Rough numbers

Paul Luchtenburg, CEO at microfinance lender AMK Co, said the number of jobs created through microlending was difficult to estimate with any accuracy. However, as a general rule of thumb, every micro-loan that led to the start-up of a new business initially created at least two new jobs - one for the borrower and one for someone else, usually a family member.

As those businesses grow, so does the number of jobs created.

AMK has extended loans to around 200,000 clients to create around 400,000 new jobs, he estimated. He put the number of jobs created across the sector at around 1.83 million, but acknowledged it was a rough estimate.

Chea Phalarin, general manager at Amret Microfinance, said his institution has extended $54 million in loans to 230,000 families. He estimated that each new business created eventually led on average to three new jobs.

Cambodia's  MFIs  have extended loans to 800,000 families, meaning up to 2.4 million jobs had been created in the country, he said.

A career in microfinance

As well as creating jobs for the poor through loans, the rapid growth in the sector is also turning MFIs into substantial employers in their own right.

Cambodia now has 17 registered MFIs, each employing more than 500 workers on average. A typical large-scale MFI may have more than 1,000 employees while the smaller ones tend to have around 300.

The biggest, ACLEDA, now employs 5,820 people, although those numbers are boosted by its commercial banking operation.

In Channy said the bank plans to recruit more staff next year. "We have not had much impact from the world financial crisis so next year we will employ 1,000 more people," he said.

"I think the microfinance industry will still have room to grow over the coming years."

He estimated that the bank's loan portfolio would increase around 50 percent to $700 million in 2009 from $470 million at the end of 2008.

Chea Phalarin said Amret Microfinance employed 700 staff. He agreed with In Channy that the global financial crisis had not greatly affected the MFI sector in Cambodia. "However, we will not recruit new staff," he said.

The International Finance Corporation, part of the World Bank group, said earlier this month it expects as much as 50 percent growth in microlending next year, down from the 60 to 100 percent previously expected, based on information provided by MFIs.