Microlenders under the microscope<\/h2>\n\n\n\n
Predominantly driven by government concessions for mining<\/a>, timber extraction<\/a> and large-scale agriculture<\/a>, deforestation in Prey Lang is compounded by illegal logging<\/a> and corruption<\/a>. But in the last decade, smallholder farmers like Piseth, with less than 10 hectares of land, have emerged as significant contributors<\/a> to the issue amid growing land insecurity<\/a>, says Cambodia-based geo-agronomist Jean-Christophe Diepart.<\/p>\n\n\n\n Microloan debt in Cambodia doubled<\/a> from USD 8 billion to USD 16 billion between 2019 and 2023, resulting in the highest number<\/a> of microfinance borrowers per capita globally. While advocates claim that access to small-scale enterprise funding has lifted many Cambodians out of poverty, its effectiveness is disputed<\/a>.<\/p>\n\n\n\n The scale of microloans in Cambodia<\/p> There were 3.06 million active microloans in 2022, in a country of 3.6 million households, states the Cambodia Microfinance Association.<\/p><\/div><\/div>\n\n\n\n Economic pressures from crop failures and unforeseen expenses can push farmers into debt, prompting land sales. In the last five years, over 165,000<\/a> debt-fuelled transactions were recorded. For people living in or near protected areas, \u201cthe logic will then be to try to clear additional land\u201d to plant more crops, Diepart explains.<\/p>\n\n\n\n Concerns about predatory lending practices have led the ombudsman for the International Finance Corporation (IFC) \u2013 the World Bank Group\u2019s private sector development subsidiary \u2013 to probe<\/a> investments in Cambodia\u2019s top microlenders worth hundreds of millions of dollars.<\/p>\n\n\n\n Although Cambodia\u2019s microfinance sector remains a magnet for western development agencies attracted by \u201cgreen finance<\/a>\u201d opportunities, such as sustainability bonds<\/a> aimed at funding environmentally friendly projects, concerns persist. The US Agency for International Development (USAID), which recently launched a USD 24 million conservation programme<\/a> in Cambodia, tells Dialogue Earth that for many communities, household debt is a \u201cmajor issue impacting their economic wellbeing\u201d.<\/p>\n\n\n\n Kaing Tongngy, spokesperson for the Cambodia Microfinance Association (CMA), told Dialogue Earth its members are prohibited from funding activities \u201cdirectly or indirectly involving the act of deforestation, forest destruction and forest clearing\u201d. But the evidence reveals a disconnect between policy and practice on the ground.<\/p>\n\n\n\n In the south-western province of Kampong Speu, bordering Cardamom National Park and Aural Wildlife Sanctuary, residents of Kteh village also face financial struggles. Sreyneang (name changed) and her husband borrowed money to renovate their house and purchase a tractor known as a koyun<\/em>. Overwhelmed by debt, they turned to illegal logging. AMK says it has 62 clients in Kteh, each with an average loan size of USD 3,766. AMK\u2019s legal manager, Sao Elen Chhe, told Dialogue Earth that the company is committed to \u201cthorough due diligence\u201d and that it \u201cprohibits financing activities that could have negative environmental or social impacts\u201d. However, village testimony obtained by Dialogue Earth contradicts this claim.<\/p>\n\n\n\n The Belgian Investment Company for Developing Countries (BIO<\/a>), a government institution, issued a USD 15 million loan<\/a> to AMK last July, emphasising strict environmental compliance. In response to Dialogue Earth\u2019s queries, BIO claimed that borrowers in Kteh did not violate its policies as they \u201cderive their income from charcoal trading\u201d, which \u201ctraditionally uses small trees or branches and does not rely on the cutting of virgin forest or other logging activities\u201d. But this is at odds with village chief Lim Him\u2019s observations.<\/p>\n\n\n\n Him maintains that while some villagers cut trees on their farms, many engage in illegal forest clearance in protected conservation areas. He is unaware of specific involvement in charcoal production. Instead, villagers sell the timber to middlemen, some of whom distribute<\/a> it to garment factories or large-scale charcoal production sites. Villagers openly acknowledge to Dialogue Earth the illegality of their actions to repay loans; their testimony backed by giant stacks of freshly cut logs piled outside their homes.<\/p>\n\n\n\n \u201cThey know logging is illegal, but they have no choice since they are defaulting on their microloans,\u201d says Him. There are scant economic alternatives to forest exploitation, with lenders and bilateral development partners seemingly ignoring the destructive activity fuelled by these loans, he notes.<\/p>\n\n\n\n Marcus Hardtke, an environmentalist with over 20 years of experience in Cambodian conservation, says there is blatant disregard by authorities of rampant illegal-logging activities for charcoal production serving the capital Phnom Penh and beyond. Hardtke tells Dialogue Earth that the charcoal trade is synonymous with the \u201corganised illegal logging\u201d afflicting protected forests near Kteh, to which \u201cthe authorities turn a blind eye\u201d. In Tonsaong Thleak village, near Prey Lang, microloans also perpetuate a cycle where logging serves as both employment and debt repayment, despite legal repercussions. A supposed reforestation concession belonging to Holy Plantation, a firm formerly named Think Biotech<\/a>, was at the centre of an illegal timber-laundering network<\/a> implicating villagers. The arrest of villager Phlaok Kroeurn\u2019s son and son-in-law for transporting logs allegedly as part of this network reflects the potential consequences: penalised by the law, yet abandoned by the companies that profit from their plight.<\/p>\n\n\n\n \u201cThe company hired my son to do the work, but when he was arrested, they didn\u2019t try to help him,\u201d Kroeurn says. Both family members had taken loans from microfinance company LOLC Cambodia to purchase koyuns <\/em>for log transportation. Holy Plantation\u2019s chairperson denies connections to illegal logging or to Kroeurn\u2019s relatives.<\/p>\n\n\n\n Srea Preah is a 3,438-hectare community-protected area within the Keo Seima Wildlife Sanctuary, in the north-eastern province of Mondulkiri. Today, less than half of that area is still forested. Despite efforts from WCS\u2019s REDD+ carbon offset project, launched in 2016 to curb deforestation, forest clearance has accelerated on its periphery, particularly in Sre Preah. This has led to increased land insecurity and diminished financial gains for the Indigenous Bunong communities who live nearby and receive payments through the REDD+ project to protect the forest.<\/p>\n\n\n\n![\"man](\"https:\/\/dialogue.earth\/content\/uploads\/2024\/04\/20231221_Cambodia-Prey-Lang-illegally-grown-cassava-loaded-onto-truck_JackBrook.jpg\")
<\/div>A village full of debt, devoid of trees<\/h2>\n\n\n\n
\u201cWe cut logs, like most people, because we need money to repay the microfinance loan,\u201d she says. Their predicament is a familiar one in the village, where ten other households, mostly AMK borrowers, shared similar experiences with Dialogue Earth. To secure loans, many villagers had used their homes and farmland as collateral.<\/p>\n\n\n\n![\"man](\"https:\/\/dialogue.earth\/content\/uploads\/2024\/04\/20231226_Cambodia-Kteh-village-trasporting-logs-on-koyun_JackBrook.jpg\")
<\/div>Systemic oversight failures worsen the problem<\/h2>\n\n\n\n
Before BIO\u2019s loan to AMK was authorised, Cambodian human rights NGO LICADHO<\/a> met with the Belgian government and \u201cspecifically warned them that further investments without safeguards were guaranteed to cause harms,\u201d says Naly Pilorge, its outreach director. These outcomes \u201cabsolutely should have been foreseen,\u201d she adds.<\/p>\n\n\n\nDebt a threat to conservation<\/h2>\n\n\n\n