‘Sustainable livelihoods go beyond simply having a job. It also implies the ability to use the money earned in a way that accommodates a way out of poverty’
When the HR Department of Pactics Cambodia signalled problems with several employees who were unable to repay loans they had taken, TPF looked into the matter in consultation with several NGOs in Siem Reap. The issue was widely confirmed: taking on one or more micro-loans is very common, and many are unaware of the implications of such loans.
Although the need for access to micro credit is undisputed, the current state of microfinance in Cambodia warrants a higher level of financial literacy amongst the population. With 45 registered Micro Finance Institutions operating in Cambodia, and numerous unregistered and informal money lenders, the competition is fierce and the population is actively approached with the possibility to take (multiple) loans. Combined with the growing number of people who take loans for self-consumption rather than capital for a business, and in the absence of a mature credit registration system, multiple indebtedness is very common.
Still poor, but now with the added burden of debt
In order to empower the Cambodian population in such a way that the availability of micro-loans is an added value, instead of a risk and obstacle to development, a higher level of financial literacy is needed.
TPF is cooperating with expert organisations in the field of financial literacy to develop a new type of training: The training will be offered in the workplace, during lunch breaks. This will likely affect attendance rates in a positive manner. And by offering shorter, repetitive sessions over a longer period of time, the impact of the content learned will be enhanced.
What are the financial habits in Cambodia? Do people budget and keep track of their expenses? How prevalent are (micro) loans exactly and how does this relate to saving money?
215 Pactics employees participated in a survey organised together with the Cambodian Micro Finance Association on 5 june 2015. After watching a short educational film, a discussion followed about budget management, borrowing and saving money.
As it turns out, the vast majority (82%) does not keep track of income and expenses, while taking on loans is quite common. And almost half of the participants are in the habit of saving money, albeit generally in an informal savings group (Tong Tin) as only 13% actually has a savings account. But on average, the participants save around USD 30 per month. Quite impressive!
Combining with these numbers the fact that over 90% of the Pactics employees participated in this survey on a voluntary basis, it seems that there is not only a need for financial literacy training, but also a strong desire to learn more about this topic!
Pactics Savings Plan
The results of the Financial Literacy Survey show an overall commitment to saving money. But the informal savings groups are generally based on a short term, and there is no real practice of long-term saving for the future (pension, children’s education).
To encourage this trend; to introduce the formal banking system as opposed to informal savings groups; and to introduce the possibility of longer term saving, TPF has developed a Savings Plan for the employees of Pactics.
By switching from Wing (‘mobile money’) to AMK Micro Finance, bank accounts were opened for all employees. For about 90%, this was their first ever bank account. Separate savings accounts have been opened for the staff members who wanted to participate in this Savings Plan.
Over the course of 12 months, the participants will save a fixed monthly amount at an interest rate of 5,5%. On top of that, Pactics offers a financial incentive for all participants who reach the end of term with the amount saved, as determined at onset.