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Escaping the debt cycle in Cambodia

The devastating impact of coronavirus on Cambodia's economy, coupled with an ongoing debt crisis, is pushing millions deeper into poverty.

Written by Agnes McGrane | 15 Jan 2021

Officially, Cambodia has reported zero deaths from coronavirus to date. However, its main industries – tourism, construction and clothing – have suffered massive losses due to the effects of the pandemic.

It’s estimated that nearly 2 million people have already lost their jobs. The World Bank has warned that the poverty rate in Cambodia – already one of the poorest countries in the world – could double as a result.

A growing problem

Cambodians often travel to find work in neighbouring countries where they can earn more money, but with the current coronavirus restrictions this is no longer an option.

And there’s another problem. The vast majority of Cambodians have taken out a loan at some point, and their debt is growing day by day.

Many loans come with extremely high interest rates, and paying them back is a struggle at the best of times. But now, with most or all of people’s income suddenly lost, repaying the debt has become impossible.

‘With the coronavirus restrictions, as well as the flooding that happened a few months ago, people who can normally go out of the country for work, or those who have worked in the labour industry, are not able to work and are not able to pay off their debt,’ explains Ponloeu Ea, Tearfund’s National Learning Coordinator in Cambodia.

Many Cambodians have been forced to sell their land or take out more loans to cover their debts, and some have even fled the country in desperation.

Breaking the cycle

Tearfund’s local partners are aware that this debt-cycle is a widespread problem in Cambodia. Even before the pandemic, the ‘Umoja’ initiative helped set up support groups through local churches to empower people to take control of their finances and avoid debt. These groups also pool their savings to start small initiatives that will generate income and benefit the whole community.

‘Our church partners are best placed to help the local communities learn more sustainable ways of managing their finances,’ says Ponloea. ‘Umoja helps people get on track with their finances and teaches them to save.’

Nakry* is one of hundreds who have benefited from the Umoja project. A few years ago she was struggling to provide for her two sons after her husband left her. She worked hard with a small grocery business, but she couldn’t earn enough money to support her family.

When her church started an Umoja group to help members of the community save and manage their finances, Nakry signed up. Not only did this help Nakry become financially stable, she grew in confidence as she was part of a group that encouraged and supported her.

‘The other members in the group gave value to me in group discussions,’ says Nakry. ‘This is really different from the past… my husband never gave value to me.’

Inspiring others

Nakry now wants to share with others the difference the group has made to her life, and encourage them to save.

‘Nowadays, I am very happy about what God gave to my family... and that I also have salvation from him as well,’ says Nakry. ‘I am continuing to save with the group members, and I also have plans to share about the advantages of saving to the community in order to help them understand and join the saving and credit project.’

As the impact of the pandemic continues to cripple Cambodia’s economy, these support groups are more vital than ever.

Ponloeu hopes that others will see the success of people like Nakry and be inspired to join a local Umoja group to receive support with their finances: ‘When people see the long-term positive impact of saving or starting small-scale and sustainable businesses, this opens up more possibilities and helps individuals escape the cycle of debt.’

Please pray

    • Thank God for Nakry, and that she was able to find a supportive group during her time of need. Pray that she will continue to thrive and be able to help others become financially stable.

    • Pray for the millions of people trapped in debt in Cambodia. Ask that they will receive wisdom, support and provision to escape this cycle and live full lives.

    • Pray for strength and wisdom for our local partners as they face challenging situations and increasing needs in their communities.

*Name changed to protect identity.

Written by

Written by  Agnes McGrane

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