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Equitable Cambodia (EC) and the Cambodian League for the Promotion and Defense of Human Rights (LICADHO) today are releasing Debt Threats: A quantitative study of microloan borrowers in Cambodia’s Kampong Speu province. The report features findings from a survey of 717 households.

The research shows that widespread over-indebtedness has led to significant numbers of serious human rights abuses – including hunger, child labour, and coerced land sales – across Kampong Speu province. Borrowers are making unacceptable sacrifices to repay loans that are overwhelmingly collateralised with land titles, and that often far exceed borrowers’ incomes and ability to repay.

“This research adds further evidence that human rights abuses are occurring frequently and systematically in Cambodia’s microloan sector,” said Pilorge Naly, LICADHO’s outreach director. “Cambodian borrowers do not have time for further delays. They need urgent debt relief for the most over-indebted borrowers in order to prevent this human rights crisis from worsening.”

Key findings of Debt Threats include:

▪ Most borrowers are over-indebted, with more than two-thirds of borrowers “strongly agreeing” or “agreeing” that their households have too much debt, and with more than 27% spending more than 70% of their income on debt repayments each month.
▪ More than 92% of households had to provide at least one land title to access a microloan.
▪ 6.1% of households sold land to repay a debt. Every MFI/bank that held more than 1% of loans in the survey were implicated in at least one debt-driven land sale.
▪ Child labour and children dropping out of school due to MFI/bank debt is far too common. About 3% of households had a child drop out specifically due to an MFI/bank loan, with many children going to work to help repay those loans.
▪ Nearly one-fifth (18.3%) of respondents were eating less food after borrowing from an MFI/bank.
▪ People are increasing their borrowing to repay other loans. In 2012, only 3.45% of loans went to repaying existing loans. That percentage rose to 34.8% of loans in 2022.
▪ The vast majority of borrowers do not understand the legal process for defaulting on loans, or do not believe that it will be used. Less than 2% of all respondents reported that they thought a seizure of land would occur in accordance with the law in the case of default.

Debt Threats is the fifth report produced by local Cambodian human rights NGOs since 2019 that focuses on harms associated with microfinance debt in the country. It is also the first to use a quantitative methodology to examine the scope of these harms.

The results of this survey indicate that across Kampong Speu’s 195,882 households:

▪ 157,413 have at least one active MFI/bank loan.
▪ 144,819 have put a land title as collateral for an MFI/bank loan.
▪ 9,602 have had to sell land to repay an MFI/bank loan.
▪ 28,806 are eating less food after taking an MFI/bank loan.
▪ 42,973 are paying more than 70% of their income toward debt repayments each month.
▪ 4,565 have had at least one child drop out of school due to an MFI/bank loan, affecting a total of 8,912 children.

“These harms have now been revealed in detail, with both qualitative and quantitative methodologies, over the past four years” said Eang Vuthy, executive director of Equitable Cambodia. “Investors, authorities and development actors need to take immediate steps to enact remediation for borrowers and ensure these predatory practices stop, and put in place necessary consumer protection regulations so that we can ensure borrowers’ fundamental human rights are respected.”

For more information, please contact:
Eang Vuthy, executive director of EC, on Signal at (+855) 12791700 (English and Khmer)
Pilorge Naly, outreach director of LICADHO, on Signal at (+855) 12214454 (English)