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“The benefits of MFIs are short, but the fear is long.”

Throughout Cambodia’s northwest, widespread microfinance debt is pushing families from their homes to find work across the Thai border. In this briefing paper “Driven Out: One Village’s Experience with MFIs and Cross-Border Migration”, LICADHO focuses on a single village in Banteay Meanchey province to dig deeper into the link between microfinance debt and migration in Cambodia’s borderlands. Through interviews conducted with remaining family members from 30 households, LICADHO’s researchers found that overindebtedness to microfinance institutions (MFIs) was the primary motivating factor for migration in the village.

“Far too many families have had to leave their homes and their country to repay microfinance institutions,” said LICADHO director Naly Pilorge. “Now, with tens of thousands of former migrant workers unable to work in Thailand due to COVID-19, the government and MFIs must help these borrowers by suspending repayments and returning land titles.”

The fact that microfinance debt drives migration in Cambodia has been noted for years by the International Organisation for Migration (IOM) and the UN Office on Drugs and Crime (UNODC). “Driven Out” seeks to explore in further detail what role Cambodia’s crushingly high MFI debt plays in this migration, which often leaves workers exposed to exploitation and human rights violations.

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Driven Out: Microfinance Debt and Cross-Border Migration

The majority of family members interviewed reported that the primary motivation for their relatives leaving Cambodia was to earn money to repay an MFI. Some MFI credit officers encouraged, or even required, migration as a precondition of receiving an MFI loan. Many of the loans are given to Cambodian borrowers in Thai baht, and MFIs themselves receive investment from European state development agencies in Thai baht, further compounding the pressures on borrowers to migrate in order to repay their debts.

Overall, interviewees reported negative feelings toward MFI debt, and more mixed feelings toward migration. Most MFI clients reported feeling scared due to their MFI debt – both because they had used their land as collateral for their loans, and because they worried for the safety of their migrant worker relatives whose salaries were required to repay the debt. The village was also largely emptied of working-age adults, with mostly older family members and children left behind. Family separation was a source of grave concern for many interviewees.

Since the research was conducted in September 2019, more than 80,000 migrants have returned to Cambodia from Thailand due to the COVID-19 pandemic. This sudden loss of income puts these families at risk of further human rights violations due to their microfinance debt, including being coerced to sell land in order to repay their loans. Formal and informal workers in Cambodia’s manufacturing, construction, entertainment, transport and tourism industries are all facing severe job losses as the nation’s economy slows amid the global pandemic.

LICADHO urges MFIs and the Cambodian government to work together to suspend repayments of microfinance debt for at least three months, and to return land titles held by MFIs to their borrowers. LICADHO also calls on MFIs and their international investors to reassess their offering of loans in Thai baht and to fully investigate whether these loans have led to unsafe migration, human trafficking or other human rights abuses.

“Migrants who have returned need assistance from MFIs and the government,” said LICADHO deputy director of monitoring Am Sam Ath. “We hope that these borrowers can get relief as they struggle to rebuild their lives and incomes.”