However, in north-western Cambodia, organisations are proving that with the right aims and management, microfinance can bring sustainable benefits to poor communities.
The Guardian reports on the work of the Cambodian Community Savings Federation (CCSF), a non-governmental organisation (NGO) which promotes community-based microfinance in the north western provinces of Battambang and Banteay Meanchey. Initially set up as a rural lending project by CARE, CCSF now operates as a government registered credit union, but with the main aim of poverty alleviation rather than profits. Through over 30 member organisations, the CCSF offers financial support to more than 31,000 low-income Cambodians.
Each member within the federation prides itself on knowing its community well and with local village offices, people can come to discuss loans personally with trained staff. There is also a strict set of criteria before loans are authorised, the main one being that anyone applying for a loan must first have a savings account. Savings are seen as a crucial safety net for people in low-income households and a 7 per cent annual rate of interest is offered on all deposits. Many villagers view their savings as for emergencies and take out loans for immediate needs. But loans are only provided to those with a permanent address, an existing business and a clear ability to repay. Background checks are made with village elders and a site visit is required before loans of over 75 dollars are granted.
The Guardian’s reporter spoke to La Morm, who lives in a village in Battambang province. She went to her local CCSF organisation for a loan to buy two sewing machines. Making clothes as a way to supplement the income from the family fruit farm, the new machines will allow her to employ some of her neighbours to help with the sewing and make an additional 75 dollars per month. She therefore expects to pay back the loan within a year. In another village, Sarom Eng is using money from a loan to employ local people to pick pods from ceiba trees. The pods are a source of kapok fibres used in mattresses and pillows. With a 50 per cent return on selling the kapok, Sarom Eng says she has “never had a problem with paying the money back” on her microfinance loans. These Cambodian women are grateful for the financial support which allows them to better provide for their families and are proof that when microfinance is linked to savings and responsible loans, it offers communities a chance to raise levels of employment and self-sufficiency.