Since this is the first time we are able to see comparable data on prices for microfinance loans in an entire country, the results sometimes lead us to questions about how the market developed and why the pricing structure is the way it is. The data on Cambodia provide a good example. Here are some of the salient features of the Cambodia market that we have learned as we have been collecting this data:
Market Features
- The Central Bank outlaws the charging of flat interest rates, so all microfinance providers charge interest on the declining balance of the loan.
- Most microlenders in Cambodia make a majority of their loans in rural areas.
- Most microlenders do not charge fees. As expected, those few that do have higher average APRs.
- About half of the lenders make loans in two currencies, US Dollars and Cambodian Riel. A few also make loans in Thai Baht.
- The oldest of the MFIs reporting to us was established in 1991.
- All of the MFIs reporting to us are registered as private, for profit companies, though many of these are owned by NGOs.
- The price curve is almost a flat line. The average price changes less than 6 percentage points from a $50 loan to a $2,000 loan.
Discussion Questions
Below are the questions that we are asking that we would like to hear your comments on. We would especially like to hear from the Cambodian MFIs that participated in this exercise.
- Why do you think the curve is so flat in Cambodia?
- What factors in the development of microfinance in Cambodia has led to a market where almost everyone charges similar prices in similar ways?
- What impact do you think the outlawing of flat interest rates has had on the pricing structure in Cambodia?
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Tags: Cambodia, Discussion
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