DEBT RESEARCH REVIEW

WAC has conducted research in conjunction with Oxfam Great Britain to understand the dynamics of debt at village level in various regions in Cambodia. At the core of this is an belief that neoliberal policies, such as those advocated by IFI's, Trade Organisations, Northern Governments and Donors is leading to an increased household debt burden at village level. The rapid liberalisation seen in Cambodia in the last decade through privatisation of services, removal of state subsidies and import tarriffs combined with a shift from subsistence agriculture to integration in the cash economy all increase household expenditures.

Liberalisation and opening up of markets has seen a reduction in and less access to common property resources and increase in prices. What this research shall attempt to demonstrate is the coping strategies employed by households and the economic dynamics of villages. Issues like migration, health care, education, access to credit and HIV/AIDS are issues that will be central to this research.

The program has visited the following provinces within Cambodia:

• Battambang
• Kompong Cham
• Prey Veng
• Svay Rieng
• Takeo

If you are interested in receiving information on the project, e-mail debtresearch@womynsagenda.org

Preliminary brief narrative

Banking services for the poor in developing countries like Cambodia are inaccessible. The majority of the rural population has limited cash savings and assets are usually expressed in the form of rice land, draft animals and machinery. When rural families need quick access to large sums of money, they often turn to money-lenders as a last resort.

This need is usually brought about by the illness of a family member, where the neoliberal reform agenda has seen a shift from state supported and/or subsidised health care to that of a user pays system. Health costs are one of the many costs that have risen for rural populations, but one which there is generally an imperative need to pay. What the user pays for an average two to three day stay in hospital and medical treatment can range from 150,000 Riels ($37.50US) to 300,000 Riels ($75US). Most families that we have interviewed in the debt research have less than 5,000 Riels cash at any point in time.

Money-lenders offer quick loans, secured by land-title, family book or a lien over an asset such as a cow or ox. Interest rates are high, generally around a flat 20% per month of the capital owing, with some rates rising to 100% per month. Terms are generally short, up to a six month maximum, but generally loans are for a period of 3 months. Capital is repaid at the end of the loan term. It is little wonder then that families who access this type of credit often end up selling one of their assets to repay the debts.

Another alternative is the use of Non-Governmental Organisations (NGOs) micro credit schemes. Lending is usually over a longer term, like 8 months (a rice growing season) and interest is generally a flat 4% of capital borrowed per month. Capital is repaid at the end of the loan period. Schemes vary, but this is the generally accepted NGO model. Late repayments on interest or capital incur a fine and the amounts are recapitalised onto the original capital. Although security is not often required, again, many lenders, seeing credit 'cheaper' than a moneylender, often access this for non-productive purposes like eating or for financing their rice plantings that are subject to the vagaries of climate. Again, many borrowers have to sell an asset to pay back the loan.

The sale of an asset, generally an asset used in the production of rice, further diminishes a household's ability to sustain itself throughout the year. The debt research has shown that it is now necessary to have cash income throughout any given year. Costs for rural populations have risen, with 'structural reforms' demanded by the World Bank, IMF, WTO accession and ADB directly causing this. State subsidised goods and services are bring rapidly 'rationalised' to place the majority of costs and debt on the end user. Examples are education, health, water, electricity, fuel, transport, fertiliser, pesticides and seeds. It is no wonder why so many rural families are turning to credit simply as a means of survival. The credit facilities available, be they private or NGO operated, enslave people into a cycle of borrowing, and having to sell assets to pay off debts. When people have nothing left to sell, they have to sell their labour to pay back the debts and try to survive. More and more now landless families are having to follow this course.

The cover of the forthcoming publication