Credit Unions Rebuild Trust in Rural Cambodia

February 08, 2007

(l-r) Hihm Sarik, credit union president; Meas Thon, CCSF operation department manager; Brian Branch, WOCCU chief operating officer and Peter Mason, CUFA executive officer.

Madison, WI—An assessment team led by World Council of Credit Unions chief operating officer Brian Branch and Credit Union Foundation (CUFA) executive officer Peter Mason recently spent 10 days in Cambodia to explore avenues for supporting credit union development.

Civil war destroyed Cambodia's financial cooperatives in the 1970s. The brutal Khmer Rouge regime abolished the use of money during its rule, effectively wiping out the financial sector. Local families dependent on harvesting rice needed loans for food during the seasons between harvests. As a result, families resorted to using money lenders, who charged as high as 180% interest per year, driving many families into debt.

Since 1998, a community reconstruction program organized by CARE Australia, CUFA and the Canadian Co-operative Association (CCA) has re- introduced the credit union concept in the Battambang province of northwest Cambodia.

In a country torn apart by decades of civil war and repeated bank failures, communities have embraced the cooperative model as a foundation for financial institutions they could trust in again. Credit unions provide affordable micro- credit loans and encourage savings. The adoption of the credit union model has fostered community ownership, pride and active involvement of credit union management. "Credit unions are re-establishing the community value of trust today in Cambodia," Branch explained. "People began depositing just a small part of their savings, testing withdrawals to see if they could get their money back, and then increased their savings over time."

In Cambodia, where average life expectancy is 50 years, loan and life saving insurance have also become important products the credit unions offer to simultaneously provide families protection and boost their confidence in the credit unions.

According to CCA research, households are less vulnerable to food shortages, children are able to remain in school and families are able to accumulate modest wealth with access to affordable financial services through credit union membership. Thanks to their credit unions, families have been able to acquire agricultural tools, carts, storage facilities, wells, water tanks, hand tractors, pumps, sprayers, threshers, ploughs, harrows, livestock, fruit trees, chickens, ducks, pigs and water buffaloes.

With small savings and loans, many members have expanded production beyond simple subsistence rice farming to engage in agricultural cash crop production and small-scale entrepreneurial production outside the agricultural sector.

Credit unions have had an impact on local markets as well. Credit union members explained to Mason and Branch that prior to the presence of credit unions, villagers were only able to access loans from their wealthy neighbors or from moneylenders who lent at 10% per month. Today, credit union members borrow at much lower rates—3% per month from their credit union. And in villages with a credit union, competition has forced moneylenders to lower their interest rates to 4%, so even non-members benefit from the existence of a credit union.

World Council's next steps in Cambodia will include assisting credit unions with constructing adequate facilities for their operations.

The Cambodian Community Savings Federation, formed with support from CARE Australia less than 10 years ago, serves as a league for 36 community credit unions. The affiliated community credit unions operate in 85 villages and serve 25,220 members. The largest credit union has 1,800 members, who are largely rural agricultural producers, self employed and entrepreneurial.

World Council of Credit Unions is the global trade association and development agency for credit unions. World Council promotes the sustainable development of credit unions and other financial cooperatives around the world to empower people through access to high quality and affordable financial services. World Council advocates on behalf of the global credit union system before international organizations and works with national governments to improve legislation and regulation. Its technical assistance programs introduce new tools and technologies to strengthen credit unions' financial performance and increase their outreach.

World Council has implemented 300+ technical assistance programs in 89 countries. Worldwide, 68,882 credit unions in 109 countries serve 235 million people. Learn more about World Council's impact around the world at

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