BOPA: Microcredit brings a safer future for Cambodian farmers

Phom Oun, who farms rice on the bank of the Tonle Sap River in Cambodia, has just received a small loan worth 500 US dollars. Now she and her husband will be able to obtain proper seed and fertiliser at a fair rate of interest.

“The price we receive for rice we grow has fallen by a fifth,” she explains. “That doesn’t leave enough money to buy supplies for the next season.”

Volatile weather creates uncertainty

Farming conditions have been poor for the past three years. The river has not steadily risen to flood the rice paddies. Windy weather has made things worse, as well as bringing an extra problem, insect pests.

Their other crop is lotus flowers, but plants that normally produce for several years have suffered from fluctuating water levels. Now they need to be replaced sooner than expected.

Phom Oun used to borrow from a local bank to pay for production inputs. Now she has switched to Chamroeun, a local microfinance company serving the rural poor. “They give better service,” she says.

From the upstairs of their house, in the village of Ta Pori, comes the sound of hammering. Her husband Yen is building a second storey. The work has made slow progress, according to how much farming income is available for building supplies.

They have five children in their family and three are still living at home although only the youngest is in school. Four already have jobs.

This year the couple decided to budget for completing the bedrooms. They are not going to lease extra land from their neighbours, as they used to. The rent money will be spent on construction.

Supporting the family by fish farming

Sok Sophea, who lives at the other end of the village, is another optimist. She and her husband Chea Chean are fulfilling their dream of expanding the fish farm. They too have taken a microloan of USD 500, to be used for stocking ponds and improving methods.

Ten kilos of newly hatched fish fry will grow into 200 kilos of fish for sale. Sok Sophea sells most of what they produce in the market of a nearby town. They have two fish ponds and want to raise production to five times its present level.

Microfinance makes future planning possible

Pa Thea of Chamroeun says there is a distinct need for microloans among small-scale farmers and fish farmers. He runs the microfinance company’s operations in the district of Ponhea Lueu.

Chamroeun has been serving agricultural customers in the Koh Chen subdistrict for less than a year but has already granted nearly 2,000 loans. The size of loans ranges from 25 dollars to 3,000, depending on the applicant’s business plan. The average sum is USD 1,000, for repayment within two years.

With no access to credit, Cambodian farmers and fish farmers often have to borrow from the merchants who buy their harvests or from local private money lenders, in order to finance operations and investments. The interest on these loans can be from 30 percent onwards, sometimes up to 250 percent per annum, which hurts their earnings.

When harvests are poor, or fail completely, farmers become destitute and have to sell out to pay off their debts.

Responsibly administered microcredit looks critically at the families’ revenues and capacities to pay, as well as business cash flows. It can provide some protection against bad weather and other unpredictable risks as well as facilitate investments. Farmers can look beyond tomorrow in their plans for the future.