Logo of Phnom Penh Post newspaper Phnom Penh Post - MFI loans do little to help poor, study finds



MFI loans do little to help poor, study finds

A woman signs a receipt for a loan at a branch of a microfinance institution in Phnom Penh.
A woman signs a receipt for a loan at a branch of a microfinance institution in Phnom Penh. Hong Menea

MFI loans do little to help poor, study finds

A study by Cambodian researchers has found microfinance institution (MFI) loans do little to lift the incomes of poor Cambodian families.

The study, released last month by the international research consortium Partnership for Economic Policy, surveyed families in 11 villages and found little difference between the incomes of people who had taken out MFI loans and those who had not.

“On off-farm self-employment income, there is no borrowing effect for poor households, specifically those at 50th or below quintile of the self-employment income distribution,” the study found. “This partially indicates challenges in nudging poor families to start non-farm activities with the small loans.”

The study suggests that households with pre-existing business activities tended to save and borrow more to expand, whereas households without other business activities were more likely to increase consumption.

Heng Samorn, secretary-general of the Independent Democracy of Informal Economic Association, said yesterday that poor people did not benefit from MFI loans because it was hard for them to access loans with favourable terms without land certificates as collateral. “The interest [rates] are very high,” he said.

Sathapana Bank chief executive Bun Mony said yesterday that smaller loans without collateral were available but had a 2.5 per cent interest rate, twice the 1.2 per cent interest rate for larger, collateralised loans.

However, he insisted that MFI terms for even the poorest Cambodians are still favourable and getting progressively cheaper. He added that MFIs provide a way for borrowers to get out of poverty, although not everyone will use their loans effectively.

A previous version of this article mistakenly included a photograph of a Wing outlet. Wing is a mobile payment provider, not a microfinance institution.

MOST VIEWED

  • Without shoes or a helmet, a young cyclist steals the show

    Pech Theara gripped the curved handlebars of his rusty old bike, planted his bare feet on its pedals and stormed as fast as he could towards the finish line. The odds were against him as the 13-year-old faced off against kids with nicer bikes at

  • Phnom Penh-Sihanoukville expressway on schedule

    The construction of the more than $1.9 billion Phnom Penh-Sihanoukville Expressway has not been delayed despite the Covid-19 pandemic, with more than 26 per cent of the project completed and expected to finish in about two years, according to Ministry of Public Works and Transport secretary of

  • Over 110 garment factories close

    A government official said on November 22 that at least 110 garment factories had closed in the first nine months of the year and left more than 55,000 workers without jobs – but union leaders worry those numbers could be much higher. Ministry of Labour and Vocational Training undersecretary

  • Singapore group seeks $14M in damages from PPSP over ‘breach of contract’

    Singapore-based Asiatic Group (Holdings) Ltd is seeking a minimum of $14.4 million relief from Cambodia Securities Exchange (CSX)-listed Phnom Penh Special Economic Zone Plc (PPSP) for allegedly breaching a power plant joint venture (JV) agreement. Asiatic Group’s wholly-owned Colben System Pte Ltd and 95 per

  • PM vows to protect Hun family

    Prime Minister Hun Sen has vowed to continue his fight against opposition politicians who he said intend to smash the Hun family. Without naming the politicians but apparently referring to former leaders of the Supreme Court-dissolved Cambodia National Rescue Party (CNRP), Hun Sen said there

  • Cambodia lauded for fight against Covid-19

    Cambodia has drawn global accolades for its handling of the Covid-19 pandemic, with a new report finding that the Kingdom has controlled the pandemic better than any other country in Asia. Dr Takeshi Kasai, director of the World Health Organisation’s (WHO) Western Pacific region,