Microfinance in Cambodia grew rapidly in the early 2000s, transitioning from small NGO-led community schemes to a highly commercialised sector dominated by registered microfinance institutions (MFIs) and commercial banks. Today, Cambodia has one of the highest penetrations of microfinance in the world, with over 2.5 million active borrowers. This has enabled many rural households to smooth consumption and fund agricultural inputs or micro-enterprises. However, concerns have risen over aggressive collection tactics, land collateral demands, and high interest rates among informal lenders, leading to debates about over-indebtedness.
| Institution Type | Loan size (USD) | Annual Interest rate (%) |
|---|---|---|
| Registered MFI | $500 | 18 |
| Registered MFI | $1,000 | 18 |
| Registered MFI | $2,000 | 18 |
| Registered MFI | $5,000 | 18 |
| Informal Lender | $100 | 120 |
| Informal Lender | $250 | 100 |
| Informal Lender | $500 | 80 |
| Informal Lender | $1,000 | 60 |
| Informal Lender | $1,500 | 60 |
| Informal Lender | $2,000 | 50 |
Using the information provided and your economic knowledge, discuss whether borrowers benefit from microfinance. Make reference to Cambodia in your answer.
