Microfinance and Household Welfare : Cambodia Policy Note
Cambodia's openness to trade and financial flows has fueled one of the fastest credit growth episodes in Asia.A remarkable expansion in formal microfinance lenders contributed to increased access to credit. Since the promulgation of the Nation...
| Main Authors: | , , , , , |
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| Format: | Policy Note |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/144661552916327946/Microfinance-and-household-welfare-Cambodia-policy-note http://hdl.handle.net/10986/31418 |
| Summary: | Cambodia's openness to trade and
financial flows has fueled one of the fastest credit growth
episodes in Asia.A remarkable expansion in formal
microfinance lenders contributed to increased access to
credit. Since the promulgation of the National Strategy for
Microfinance in 2007, Cambodia’s microfinance sector has
expanded rapidly, with both assets and credit growing at
annualized rates of over 40 percent. While access to credit
has helped ease financial constraints for households, one
key concern is how the cost of credit and increased exposure
to risk might affect household welfare. At the household
level, low financial literacy could result in poor borrowing
decisions and heighten risks. There are concerns that
households may be over-borrowing and increasing their
exposure to risks, as there are signs that the market is
already highly saturated, given estimated absorption
capacity at this level of development. This policy note
assesses the impact of access to credit on household welfare
in Cambodia and providesevidence on the drivers of the cost
of credit in the microfinances sector. To fill the existing
knowledge gaps, this policy note uses the latest available
data from official sources to provide evidence on (i) the
impact of microcredit on household welfare, (ii)
profitability and cost of credit in the microfinance sector,
and (iii) the effects of the interest rate cap in the
sector. This note ultimately presents a series of policy
options aimed at facilitating affordability and reducing the
cost of credit, while maintaining sector profitability and
minimizing risks (both for households and the financial
system). The policy options have been developed in
consultation with sector stakeholders. |
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