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SIEM REAP: Trapped under a mountain of crippling debt, Cambodian farmer Roeurn Reth fears she will have to sell her land to pay off microfinance loans that have skyrocketed due to her family’s job losses caused by the pandemic.
What started as a $ 3,000 sum from a loan shark for his son’s wedding has now grown to about $ 7,000, he said, as a result of additional financial needs that have arisen.
His children, who crossed illegally into neighboring Thailand, previously sent money home to help with refunds, but are now out of work.
“Due to COVID, we could not find work … and my children have no money,” he tearfully told AFP outside his modest home in the northern province of Siem Reap.
“Now, I can’t pay my debts.”
Roeurn Reth, 50, is among the more than 2.6 million Cambodians who have turned to microfinance due to limited access to traditional banking.
But in poor countries with little regulatory oversight, the practice has been criticized for predatory tactics that include targeting rural villages where residents have limited financial vision.
The brochures advertise microfinance services in a village in Siem Reap province, Cambodia. (Photo: AFP / TANG CHHIN Sothy)
In Cambodia, where the median annual income is a meager $ 1,700, borrowers in 2019 accumulated a total debt of $ 10 billion to microfinance lenders.
This puts the kingdom on an average loan of US $ 3,804 per person, the highest amount in the world, according to local rights group Licadho.
The lack of enforcement also causes illegal lenders to offer “tremendously high” interest rates of up to 30 percent for a year, said Am Sam Ath of Licadho.
READ: Land to lose: Coronavirus exacerbates Cambodia’s debt crisis
The informal lending industry has long been a tricky subject for the kingdom, he explained, and Cambodians turned to licensed microfinance institutions to repay private lenders only to find themselves caught in a debt cycle with more lenders.
“With the COVID pandemic and the flooding in rural areas, people are facing twice the problems, with more difficulties with debts,” he said.
While Cambodia itself has recorded only around 300 cases, the pandemic has caused tens of thousands of migrant workers to return from Thailand as jobs dry out, putting families living from paycheck to pay low. Pressure.
Desperate, Roeurn Reth and her husband traveled from their sleepy village of Trapeang Veng to the capital Phnom Penh to seek work on construction sites, only to be turned away due to their age.
She worries that the next time debtors come, they will intimidate her into selling her house and the rice fields they have as collateral.
“I am so worried every day that I swallow the rice bitterly,” she said.
“EASY CASH”
Surrounded by lush rice fields, remote Trapeang Veng is only accessible by bumpy roads, 50 km from the tourist spot of Angkor Wat.
Faded posters advertising “easy money” are posted on coconut trees throughout the town, promoting loans as a simple path to fulfillment of aspirations, from motorcycles and tractors to dream homes.
But many houses have been abandoned by owners who have fled to avoid debt collectors.
A new house in Cambodia built through microfinance whose owner fled to escape huge debts. (Photo: AFP / TANG CHHIN Sothy)
These houses are hard to miss, said the Dorm Deam village chief, pointing to a concrete house with ornate wood carvings on the padlocked front door.
“Since the coronavirus pandemic, the situation has worsened,” he told AFP.
“They are strangled by debt.”
Currently, more than three-quarters of the 113 families in Trapeang Veng owe a total sum of about US $ 300,000.
Human rights groups have called on the government to freeze repayments and required lenders to return more than one million property titles as collateral.
Some 270,000 Cambodians have restructured their loans in recent months to cope with the economic consequences of the virus, said the head of the National Bank of Cambodia, Chea Serey.
CHILDREN ON BOARD
With so many Cambodians of working age migrating to neighboring Thailand for work (up to two million according to rights groups), the remaining residents in Trapeang Veng are mostly the elderly and children.
Villager Penh Tay says her daughter and two sons crossed the border but lost their jobs after the virus outbreak.
“I was hoping my children in Thailand could help, but now they don’t have a job,” the 53-year-old woman told AFP as she combed her granddaughter’s hair.
With a combined debt of $ 20,000 to a microfinance group and two informal moneylenders, Penh Tay said she cries herself to sleep at night.
Many villages are populated by the elderly and children, as Cambodians of working age travel to Thailand to work. (Photo: AFP / TANG CHHIN Sothy)
A lender seized your cow last month after you missed a payment deadline.
“I am afraid of losing my home and not having a place to live,” he said, adding that his neighbor was forced to sell.
“I don’t know what they will take from me next.”
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