The “microfinance” industry — long touted as a way to help poor, rural communities in developing countries — is pushing tens of thousands of farming families into debt traps as they attempt to adapt to a changing climate, according to a report.
The study, conducted by researchers at a group of U.K. universities, looked at a range of case studies in Cambodia, where it found easy-access loans had caused an “overindebtedness emergency” that was undermining borrowers’ long-term ability to cope with their new environment.
In Cambodia, around 61% of people live in rural areas, and 77% of rural households rely on agriculture, fisheries, and forestry for their livelihoods, according to development agency USAID.
Many have seen these traditional livelihoods affected by a mix of climate change, over-development and illegal logging and fishing, with increasing droughts, wildfires and unpredictable rainfall patterns causing crop losses and damage to the ecosystem of Cambodia’s vital Tonle Sap lake.
The establishment of hundreds of MFI branches since the early 2010s, which can be seen advertising services along roadsides around the country of 17 million people, has often harmed rather than helped those affected, the report published in September found.
In its survey of around 1,800 borrowers, roughly half cited feeding their family as their primary motivation.
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