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

  • Massive stingrays may live in Mekong’s deep pools

    US scientists have suggested that unexplored deep pools in the Mekong River in an area of Stung Treng could potentially be home to significant populations of giant freshwater stingrays, one of the world’s largest freshwater fish species. This comes as a fisherman hooked a 180

  • PM takes time to meet, greet Cambodians living in the US

    After landing in the US ahead of the ASEAN-US Special Summit, Prime Minister Hun Sen was received by over 1,000 Cambodian-Americans including political analysts who welcomed him with greetings, fist bumps and selfies. Hun Sen also met with analyst Mak Hoeun, who had allegedly spoken ill

  • PM heads to Washington for ASEAN-US special summit

    Regional and international issues and how to bring the ASEAN-US partnership to another level will be discussed at length as Prime Minister Hun Sen and his ministers arrive in Washington, DC, for a special summit on May 12-13. During the trip, Hun Sen and ASEAN

  • National Assembly refutes EU resolution

    The National Assembly (NA) has hit back at a European Parliament resolution condemning the political and human rights situation in Cambodia, calling it another display of the Parliament’s “double standards”. Key points of the resolution include a warning that the Parliament could exclude the

  • Soaring global fuel prices: an opportunity for Cambodia?

    Cambodia is feeling the squeeze from the soaring global coal and oil prices. Electricity du Cambodge (EDC)would certainly be hurting from this reality, and most likely re-assessing its plans to add more coal power stations. EDC buys half of Cambodia’s electricity from plants

  • PM reflects on shoe throwing: Free speech or act of violence?

    Prime Minister Hun Sen on May 17 questioned whether a man who threw a shoe at him while he was in the US was exercising freedom of expression or if it was an act of hostility. Hun Sen was referring to an incident last week when