In
the previous strategic plan, WAC undertook a series of research
pieces in five provinces in Cambodia looking at the use of micro
credit. What the research found was that, while micro credit was
available from many sources, the interest rates, terms and conditions
imposed on these borrowings by, even by NGOs, made the loans usurious.
With deepening poverty and rising costs for the means of agricultural
production and basic health needs, many people looked towards
the use of micro credit as a means of survival. Subsequent low
production or health difficulties often led to a default on these
loans and many people interviewed had to sell a major asset to
repay these debts. This asset was frequently a productive asset
such as a cow, a piece of equipment or their rice-land.
2005
was the International Year of Micro-credit, with a proclamation
that “Micro-credit has been changing people's lives and
revitalizing communities since the beginning of trade”.
This may be true, but WAC research has shown that micro credit
in Cambodia has been a contributing factor in deepening poverty.
In response to the results of this research, one international
development agency decided to end its grants to local NGOs operating
micro credit. This was because they saw that credit under the
existing ‘de-regulated’ and NGO operated model in
Cambodia was not working.
In
the coming three years, WAC will work with selected communities,
civil society organisations, government, and the press to devise
effective ways to address problems resulting from debt created
mainly by micro-credit, and also through other financing mechanisms.
The ultimate goal is to cancel rural debt and push for sources
of finance for rural communities that are more appropriate to
their needs and capacities, and which do not drag them into debt
traps and poverty. Here also, activities will include grounded
action research, support for communities to be able to get out
of the debt trap and empowerment of communities so that they are
confident and able to demand policies that protect their long
term economic security.
The
main elements of the strategy in this project are to: 1) show
the public, legislators, policy makers, press and donors that
micro-credit/micro-finance is a form of indebtedness, and loan
conditions can trap poor communities into financial systems over
which they have no control and which makes them poorer; 2) push
the government to take urgent action to provide sustainable financing
and development support for the poor; although cash-poor communities
may require capital, pulling them into financial schemes without
providing appropriate social and financial services, and adequate
policy support to protect their assets will drag them into a downward
spiral of poverty and economic displacement; 3) push all actors
(NGOs, private banks and donors) operating financial schemes for
the poor to acknowledge that their schemes create poverty, and
that they should not use the poor for their own incomes and perpetuation,
and; 4) encourage government and other actors to develop credit
and finance initiatives for the poor, based on their realities
and capacities; further, these initiatives must be accompanied
by supports for economic activities by which loans can be repaid,
and should be regulated by government to prevent abuse and exploitation
of the poor by any actor.
Here
too, it is extremely important that the project builds the capacities
and confidence of indebted communities to be able to express their
problems to the public, and discuss with policy makers and legislators
about what types of financial schemes and supports they need,
and to be able to follow up with the government that their needs
are met. In this project also, links will be made between rural
and urban poverty through already established ‘Drop-in Centres’(DICs)
for factory workers and the Women’s Network for Unity (WNU)
for sex workers.
PROJECT
MISSION
- To address
the main issue on the rural debt that the communities owed
from NGOs micro credit, private bank, money lender loan, and
local debt
- To
assess the effectiveness of NGOs running micro credit program
in order to reduce poverty
- To consult
with people to seek what are the models of micro credit that
appropriate to their needs
- To
improve the regulation of the credit industry
- To influence policy makers for the regulation on the micro
credit industry on the rural poor.
