Clear Path International Issues Micro Loans in Rural Cambodia

Last Friday, Clear Path International and our Cambodian partner, Cambodian Volunteers for Community Development, issued micro loans, for the second time, to our farmer cooperative members, many of them landmine / UXO survivors, all of them desperately impoverished rice farmers.


Clear Path International issuing micro loans in Battambang, Cambodia.


Muhammad Yunus experimented with microlending in Bangladesh in the 1970's and made such a success of his program, that he and his Grameen Bank won the Nobel Peace Prize in 2006. He made microlending popular, and it seems that everyone working on poverty issues has read his book (myself included) and everyone has a version of his program incorporated into theirs. While I don't believe that micro lending alone is a one-stop shopping solution for ending all poverty, it certainly seems to be making huge differences in the lives of the disenfranchised.

Rural Cambodians tend to be extremely poor. The World Bank released a report on social inequality in Cambodia earlier this month, and noted that the number of people living below the poverty line did decrease between 1994 and 2004, from 47% to 35%. Good news, but 35% of 14 million people, is still an awful lot of people living on less than $2 per day. The rural poor definitely lack access to credit. They live very far from major cities. They tend to have no collateral. And, they usually need such small amounts of money, that its not cost effective for traditional banks to lend.

When interviewing some of our cooperative members, I find varying reasons for their need. Some have land, but no machinery or tools to till the land for planting. Many cannot afford the rice seed it takes to get started. Others have been affected by crisis' which have rendered them in debt and unable to climb out. Perhaps a family illness which required medicine or medical care, or the loss of the family's breadwinner. I talked to one man who borrowed money to send his grown children to Thailand, in search of employment. They returned without finding work. Yet, the debt remains.

While banks are not lending to these rural poor, someone is. The process involves a middleman. I don't have a mental image of what this "middleman" looks like, but I know the interest rates are high, the re-payment schedule is aggressive, and the farmers tend to end up in a cycle of debt, often not able to save enough seed to replant the following year. My only experience with a cycle of debt involves having a credit card in college, with no real job and too many distractions from studying. But, I had a safety net. I called them my parents. These farmers do not have that safety net. Their cycle of debt doesn't end.

Last year was our maiden voyage into micro credit. We issued loans of up to $250.00 to 25 families. We had a 100% payback rate. The interest rates are reasonable, the schedule allows for the loans to be returned after the harvest season. We even accept rice in lieu of cash. The farmers worked together, taking advantage of lower prices when buying in bulk, reducing transportation costs by purchasing for the entire community when going into town, and by holding each other accountable. The farmers I spoke to expressed real joy when able to finally pay off the middleman or save enough seed for the following year. Its not the end of their poverty. It won't solve all of their problems. But, its a start.