Borrowing Across Borders: Migration and Microcredit in Rural Cambodia

Abstract

This article explores an unexpected and overlooked consequence of the expansion of microcredit: how it interacts with migration patterns. Drawing on qualitative research in northwest Cambodia, this study explores the uses, meanings and implications of ‘migra‐loans’ — microcredit loans that are used in tandem with household strategies of international migration. Using microcredit in combination with migration allows households to immediately meet consumption goals and utilize the credit being actively promoted by microfinance institutions, while also retreating from insecure and less profitable local livelihood strategies. These strategies problematize expectations about the developmental potential of microcredit, and highlight the importance of local context in framing rural livelihood choices.

Loans and Leaving: Migration and the Expansion of Microcredit in Cambodia

“…First, qualitative research has documented that households use formal loans to finance the costs of migration, a pattern that has been documented in Cambodia and in other microfinance-saturated communities (Chan and So 1999;Stoll 2010;Bylander 2014). While bank and MFI policies in Cambodia generally do not support loans to be used to finance migration, in areas where migration is common, loan officers have noted that loans have been used to cover migration costs (Bylander 2014). Second, households with relatives already away and regularly remitting may view formal credit as an advance on remittances to come, a pattern which has also been identified both within and outside of Cambodia (Duffy-Tumasz 2009;Bylander 2014).…”

“…Second, households with relatives already away and regularly remitting may view formal credit as an advance on remittances to come, a pattern which has also been identified both within and outside of Cambodia (Duffy-Tumasz 2009;Bylander 2014). Qualitative research on microcredit in the Cambodian context has suggested that use of formal credit, and the resulting indebtedness, can lead to distress migration (Ovesen et al 2014;Bylander 2014). Among surveys of microfinance clients in credit-saturated areas in Cambodia, the migration of a family member was noted as a key way that households cope with overindebtedness (Liv 2013).…”

“…Recent qualitative studies find support for the first two mechanisms. First, qualitative research has documented that households use formal loans to finance the costs of migration, a pattern that has been documented in Cambodia and in other microfinance-saturated communities (Chan and So 1999;Stoll 2010;Bylander 2014). While bank and MFI policies in Cambodia generally do not support loans to be used to finance migration, in areas where migration is common, loan officers have noted that loans have been used to cover migration costs (Bylander 2014).…”

“…While bank and MFI policies in Cambodia generally do not support loans to be used to finance migration, in areas where migration is common, loan officers have noted that loans have been used to cover migration costs (Bylander 2014). Second, households with relatives already away and regularly remitting may view formal credit as an advance on remittances to come, a pattern which has also been identified both within and outside of Cambodia (Duffy-Tumasz 2009;Bylander 2014). Qualitative research on microcredit in the Cambodian context has suggested that use of formal credit, and the resulting indebtedness, can lead to distress migration (Ovesen et al 2014;Bylander 2014).…”

“…Yet recent qualitative studies of microfinance across the developing world have strongly challenged this expectation, pointing out that rural households often use microcredit for basic household needs rather than productive investments (Dichter 2007;Rahman 1999;Bateman 2010), that even where they invest in microenterprise, rural households may struggle to make a profit and repay debts (Liv 2013), and that the kinds of investments rural households are most equipped to successfully invest in are unlikely to provide the immediate and regular profits needed for MFI repayment schedules (Pellegrina 2011). These have all been identified in the Cambodia context (Liv 2013;Phlong 2009;Ovsen et al 2014;Bylander 2014). Thus while microcredit has expanded in Cambodia, rural farmers often remain fearful of being unable to repay loans, struggle to do so, and may see microcredit more as a coping strategy than as a path to productive investment (Nang 2013;Liv 2013;Fitzgerald and Sovannarith 2007).…”