Covid in Cambodia: Vulnerable Households and Debt

Drowning in debt? Cambodian households during Covid-19 (Image:Gcreatives/CKS)

Like most other countries, Cambodia could not escape Covid-19. The pandemic put immense pressure on the country’s public health system and caused an economic contraction of around 3.1 percent in 2020, primarily affecting MSMEs and enterprises in the garment, footwear, and tourism industries, all of which had been star players in the Cambodian growth story.

The decline in economic activity led to falling wages, job suspensions, and layoffs. Cambodia’s official poverty rate was 13.5 percent in 2014. In 2020, the UNDP predicted that Covid-19 would raise this rate to 17.6 percent, 1.34 million people would fall back into poverty, and the unemployment rate would increase to 4.8 percent. With falling incomes have come rising levels of debt. According to the National Institute of Statistics’ Cambodia Socio-Economic Survey, conducted between July 2019 and June 2020, an estimated 1.25 million households, just under 35 percent of all households in Cambodia, were indebted at that time.

Covid-19, then, appears to have driven many Cambodians into poverty and indebtedness, but how has it affected incomes, and how are Cambodians coping with the dual crises of a pandemic disease and growing levels of debt? Are existing social mechanisms capable of providing support?

To answer these questions, The Asia Foundation’s partner the Center for Khmer Studies (CKS) prepared a research report based on interviews with 34 bank officers from registered microfinance institutions and 119 ordinary borrowers in the garment and footwear, tourism, or export-oriented agriculture sectors or who were cross-border labor migrants. The fieldwork was conducted in Battambang, Siem Reap, Kampong Chhnang, and Phnom Penh. The new report, Microfinance in Times of Covid-19, was published on June 21.

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