For Seoung Lort, understanding financial literacy is crucial, especially among ethnic communities with limited access to education due to their remote, mountainous dwellings, far from public schools.

A man in his late twenties, Lort belongs to the Kreung ethnic group and lives in Tun Village of the Taveng Krom commune in Ratanakiri province’s Taveng district. The financial awareness within his community is limited.

His people traditionally relied on borrowing money from friends and relatives within their village for various expenditures, including farm support. Repayments were typically made in cash, or by exchanging animals or agricultural products.

With the introduction of rural credit and financial institutions in recent years, there has been a shift. These services have influenced people’s attitudes towards loans, initially perceived as ‘easy money’ without considering the risks.

Lort shared his experience of taking loans from a microfinance institution (MFI) four times to purchase equipment, machinery and a mini truck for his rubber plantation. He has managed the loans effectively, repaying them through annual rubber resin sales.

“I’ve taken loans from an MFI of 20 million riel [about $5,000] four times for my plantation. I haven’t encountered any issues since I started taking loans; I always repay on time,” he says.

At a financial literacy programme centre in the same village, Nhav Vorn, a 60-year-old father of eight, recounts his participation in a training course to learn about family money management. Each course lasts five weeks, with sessions of approximately two and a half hours each week.

Since 2012, he has repeatedly borrowed small amounts from an MFI for house construction and family support. 

“I’ve been taking loans since 2012, approximately one million riel each [about $250], to build a house. Without the loans, I wouldn’t have a suitable home for my children,” he says.

Before receiving the loans, he was informed about his repayment obligations. 

“The credit officers always inquire about my income. I tell them I earn from raising cows and buffaloes, which I can sell to repay the loan. I’ve never had a problem,” says Vorn.

Officers warned him about the consequences of non-repayment. 

“They told me that if I couldn’t pay, they would seize my [livestock]. But I assured them I would sell it for repayment. I’ve never been late with payments because I understand my obligations from the training course with other villagers on managing our expenses,” he adds.

Local authorities and responsible loan usage

Taveng district precinct encompasses two communes with 20 villages, home to over 300 families and 8,000 people. The majority of these residents are from ethnic backgrounds, with 80 per cent being Kreung and 50 per cent women, most of whom are engaged in farming.

Although there are no MFI offices in his district, numerous credit officers from provincial towns visit to seek out clients directly. In recent years, the number of villagers obtaining loans from these officers has surged, as they perceive it as an easy way of getting money and prefer it to borrowing from peers or relatives, according to district governor so Vanthin.

“From my observation, before we had the training, they were very eager to take loans because it seemed easy, and they didn’t worry about repayment as they were earning a lot from forestry. However, we later received complaints from MFIs asking us to intervene. 

“Since receiving education, the villagers have become more responsible, and some have decided against taking loans. We don’t have exact data on how many families have taken loans, but they approach us for help when they face problems,” he explains.

“Regarding financial literacy, I’ve noticed that some institutions provide training to educate villagers about effective loan usage and avoiding over-indebtedness. As a local authority, we support and encourage financial entities to educate our people, especially as the number of these grows. 

“This is to … help our people understand monetary planning. I also advise our residents to use loans in a responsible manner,” Vanthin adds.

Empowering ethnic communities

In August 2023, the Association of Banks in Cambodia (ABC) and the Cambodia Microfinance Association (CMA) collaborated with their members to address allegations of suicides and attempted suicides linked to the aggressive tactics of loan officers in the province.

Both groups, supported by the National Bank of Cambodia (NBC), remain committed to promoting financial literacy and access. They are also dedicated to ensuring that all members comply with their responsible lending policies and codes of conduct.

“We will also continue to review our individual credit assessment and collection policies and make necessary refinements to ensure a balanced approach is maintained, protecting the interests of both customers and banks and MFIs,” their joint statement read.

Gorddon Paterson, an independent project coordinator based in Ratanakiri province, has been working in Ratanakkiri with ethnic communities since 1995, focusing on the rights protection of these groups.

“Why am I interested in financial literacy here, particularly regarding debt? It’s because it poses a risk to ethnic people who generally have less education than the average person. Concerning loans, in their culture, there’s no perceived need for repayment. That’s why, since 2016, when I noticed MFIs coming here and perceived the risks they posed, my colleagues and I started to introduce and educate them about money management,” he explains.

Paterson says that with support from the Canadian embassy in Phnom Penh, ABA, and the Angkor Gold mining company, a financial literacy programme was established in line with the NBC, the ABC and the CMA. The initiative offers short training courses to vulnerable ethnic people in rural areas of the province.

He says about 90 per cent of minority populations have taken loans, most commonly to support farming, with others borrowing from unofficial lenders who charge high interest rates.

“In 2022 and 2023, with the cooperation of the Canadian embassy and ABA … we’ve conducted 31 classes in 26 communities, with each session comprising roughly 25 to 40 families. I have trained 36 local teachers and plan to conduct a total of 51 classes,” he adds.

Commitment to financial understanding 

Chheang Vuthy, head of credit training at ABA, acknowledges that there have been issues affecting ethnic groups. These have arisen partly because some financial institutions have not provided clear information about loans to these groups, who often lack sufficient knowledge on the subject.

“For us, as a major player in the industry, we always adhere to the industry’s code of conduct. That is why we are here: to teach them about financial literacy, rules and regulations. Our aim is to build their knowledge about accessing and utilising loans.

“We consistently work with local authorities, meeting them once a month to discuss [their] effective use,” he adds, noting that while his bank does not provide small loans, they strive to educate people through training programmes.

Since the introduction of the financial literacy initiative by ABA, in collaboration with a local non-profit organisation (NPO), there has been noticeable improvement in financial planning among the ethnic people in his village.

“Personally, I have gained some knowledge from the training. With it, I can use loans effectively and appropriately. I’m able to manage my debt and have a better understanding of income and expense management,” says Lort. 

Every harvest season, his rubber plantation earns him 20 million riel (about $5000), enabling him to repay any loans he has taken. 

“[It] has helped improve my family’s situation, as it provides the opportunity to purchase necessary equipment [for farming],” he explains.

The NBC reports that as of June 2023, the Kingdom had 59 commercial banks, nine specialised banks, five deposit-taking MFIs, 82 non-deposit-taking MFIs and 118 rural credit institutions.