Giving rural farmers access to credit

Location: Svay Chrom village, Battambang province

Summary: Banteay Srei supported low interest rural credit schemes to improve rural livelihoods.

“They (the community) needed an honest person to manage the credit scheme and so they chose me,” Chum Cheurn, community facilitator and credit scheme manager for his village, says proudly. Since Cheurn began managing the credit scheme three years ago, there are now 39 members and the capital has increased from 10 million riel to over 14 million riel (from $2,500 to over $3,500 USD).

In Cambodia, borrowing money is one of the coping mechanisms that the rural poor use to deal with the seasonal nature of their livelihoods and key lifecycle events. “Members take out loans mainly for agriculture: for rice farming, vegetable growing and to buy fertiliser. Most members then profit from their loan and are able to pay it back very easily” Cheurn explains. Loans vary from 200,000 riel to 1 million riel (from $50 to $250), and most people pay their loan back after one year.

Cheurn explains the terms and conditions of the loan to community members and manages contracts. Loans incur just 3% interest, which is significantly lower than many other private lenders including micro-credit agencies, and with better loan conditions, keeping profits of the scheme within the community. Of this, 1% goes to increase the credit scheme’s capital, 1% goes to the community facilitators and 1% goes on administration, of which they also put aside a small amount as an emergency fund for members for unexpected events such as funerals and health scares.

Banteay Srei has helped to set up 10 such schemes in 10 target villages in Battambang province. Access to credit is vital for the livelihood cycle of rural households, and community-led credit schemes such as this one ensure that members incur little risk, as the interest rate is so low.

Cheurn has seen the benefits that development initiatives such as the credit scheme are having on his community. Inspired by what he has seen in a nearby ‘phased out’ village which had been receiving support from Banteay Srei for many years, Cheurn hopes that his village will be able to introduce a rice bank in the future so that they are able to assist the most vulnerable families experiencing food insecurity.