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Complement or Competitor. This case was written by Michele Costello, an Adjunct Professor at Baruch College, solely as the basis for class discussion and is not intended to serve as an endorsement, source of primary data, or illustration of effective or ineffective handling of a business situation. Names and certain other identifying information have been disguised or purposely omitted to protect confidentiality. Copyright © 2016, Michele Costello – Do not reproduce without written permission of the author .edu.”I don’t know how much money I earned or spent last week, but I know that my expenses are higher than my income, so I borrow …I am so busy with tongtin activity. For all three groups I am in now it is R100,000 per week. I bid one time per week on each group…it is too much work to play everyday.”- Thida, from Koh Krabei, CambodiaIt’s a hot day in Koh Krabei, Cambodia. Sitting on a wood bench outside her tin roof home, Thida takes a break from collecting Jasmine to drink some water and contemplate her situation. Her jasmine growing and gathering has produced steady income in the past, but now she is suffering from lost crop due to a pest infestation. In addition, the family has still not recovered financially from the cost of her daughter’s emergency stomach operation in October and she just paid her children’s university fees in November. Gifts from friends and family (a neighbor, a foreign financial sponsor, her daughter who is working in the city, and local political party) have only covered a portion of the family expenses, and she still increased her debt burden to cover those costs. She is now making multiple payments on microfinance loans and informal community savings and loan clubs called “tongtin” each week. She will see the leader of her “tongtin” savings and loan club will tomorrow, but she does not have the funds for her required weekly contribution. As she ponders her options, a representative from a local microfinance institution approaches her home to discuss a new lending program.



Microfinance refers to the provision of a wide range of financial products and services to those who are excluded from the formal finance sector. According to 2011 data from the World Bank, an estimated 2.5 billion working-age adults globally, or more than half of the total adult population, do not have access to formal financial services (Ledgerwood, The New Microfinance Handbook, 2013, p. xvii). Examples of microfinance products and services include loans, savings, insurance, payment transfers, skills/training, and social benefits. Services are provided by microfinance organizations known as Microfinance Institutions (“MFIs”) which are structured in a range of financial and non-financial institutions operating non-profit and for-profit models. The industry’s key goal is to expand financial access to excluded

P a g e 2 | 23THE CITY UNIVERSITY OF NEW YORKsegments of society including marginalized populations and those at the bottom of the economic pyramid.Some industry observers have called microfinance a “movement that envisions a world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services”1.While microfinance activity has roots in governmental and non-governmental organization (“NGO”)economic development activities over many decades, microfinance in the form that it is known today took root in the 1970’s through pioneering organizations such as ACCION International, Grameen Bank, and Opportunity International. These organizations sought to recognize the unique challenges of the poor and redesign the delivery of appropriate financial products and services to this population. While many organizations initially began with lending programs that targeted specific observed needs in the communities in which they worked, the MFIs often expanded to provide other services either to breakdown barriers to access, protect clients, and/or meet other short and long term client cash flow management needs. In this way, the industry has evolved from a lending-centric to a diversified financial services focus. Microfinance gained global prominence in the mid-2000’s with the 2005 UN Year of Microfinance campaign and the 2006 Nobel Peace Prize award to Mohammed Yunus and Grameen Bankfor their work in microfinance and its impact on economic stability and peace.Today, there are thousands of known MFIs globally servicing over 100 million borrowers and savers, and the market has been experiencing a double digit growth rate. A of 2013, the global average loan size perborrower is roughly $2,000, but loan sizes can range from $20 to $20,000 depending on the geographic location and sophistication of the client. (Symbiotics, 20132 ; mixmarket.org)


Cambodia is located in South East Asia, and shares its borders with Laos, Vietnam and Thailand. It is divided into twenty-four provinces and has a population of approximately 14.8 million people, with 80%of its population living in rural regions (World Bank, n.d.). With a per capita GDP of US$ 944, Cambodia is one of the poorest countries in the region (World Bank, n.d.) Cambodia is a partially dollarized economy(Kang, Is Dollarization good for Cambodia?, 2005), due to periods of Vietnamese and United Nations administration control following the defeat of the Khmer Rouge military regime. As a result, many individuals and institutions use the Riel (introduced by Vietnam, symbol “R”) and the US dollar (used during the period of UN administration, symbol “$”) interchangeably. The main sectors of its economy are agriculture, garments, tourism, and construction (Kang, 2005).

Cambodia’s microfinance industry began in 1990 (Cambodia Microfinance Association, n.d.) to address poverty and lack of financial access. The country has one of the most developed and competitive microfinance sectors in the world due to its recent relative political and economic stability coupled with1 Robert Peck Christen, Richard Rosenberg & Veena Jayadeva. Financial institutions with a double-bottom line:implications for the future of microfinance. CGAP Occasional Paper, July 2004, pp. 2-32 “2013 Symbiotics MIV Survey: Market Data & Peer Group Analysis;” Published by Symbiotics Group; 2013P a g e 3 | 23THE CITY UNIVERSITY OF NEW YORK the large unmet financial need and the large presence of NGOs and aid organizations operating in the country following the rule and genocide of the Khmer Rouge regime. In the 1990’s, international donors and non-governmental organizations began launching non-profit micro-credit projects within rural development programs which became the microfinance institutions we see today. As of 2012, there are83 registered financial institutions in Cambodia (International Monetary Fund, 2013). According to Cambodia Microfinance Association, an industry trade organization, microfinance institutions3 serve 1.9million people (Cambodian Microfinance Association, n.d.).

Microfinance is part of the formal financial sector and is a regulated activity in Cambodia. When the government established the Central Bank Law of 1996, it gave the National Bank of Cambodia,responsibility to regulate and oversee the microfinance sector (Vada, 2010). In 2000, the National Bank of Cambodia issued regulations regarding the classifications for Microfinance Institutions (Vada, 2010)based upon scale and scope. The largest MFIs are required to be licensed by the central bank4, and are regulated in a similar manner to commercial banks with the exception of a lower capital requirement(Vada, 2010). Medium-sized MFIs, on the other hand are required to register with the central bank, and are subjected to less stringent rules – less complicated reports (Vada, 2010). Lastly, the smallest MFIs are not regulated or supervised because of the high operating costs of such work (Vada, 2010). These licenses pertain to the ability to issue loans. In order to take deposits, there is an additional set of requirements testing scale and sustainability to obtain a deposit-taking license.5 The National Bank of Cambodia does not impose restrictions on interest rates charged by MFIs, and therefore MFI rates are set by market forces. However, rates charged by MFIs in Cambodia have been documented by researchers as two to three times lower than the interest rate charged by community loan sharks (Vada, 2010). Therefore, the launch of the microfinance sector has provided a source of low cost loans to the rural population.3 A microfinance Institution is defined by the National Bank of Cambodia, as having a loan portfolio outstanding equal to or greater than $25,000, or have mobilized savings of $250 or more, or having 100 depositors or more.4 37 of the 83 MFIs are licensed by the central bank (National Bank of Cambodia, n.d.); 7 of the 37 subset of MFIare licensed to take deposits5 Institutions need to have held the MFI license, as described in the previous paragraph, for three years, and have a good and sound financial condition judged by the central bank’s internal rating system for at least two years,before they can apply for this license. In addition, these MFIs need at least KHR 10,000 million (USD 2.5 million), a Management Information System, to conform to the chart of accounts, and have a sustainable profitability for two consecutive years.

P a g e 4 | 23THE CITY UNIVERSITY OF NEW YORK The country also has a high saturation of microfinance institutions (Liv, 20136). Because of the high levelof microfinance activity and competition in Cambodia, the potential for clients to receive multiple loans from different MFIs is high. In 2011, the Central Bank created the Credit Bureau of Cambodia, which requires registered MFIs to report lending activity and thereby develop individual credit history profiles for clients (Credit Bureau Cambodia, n.d.). There are still limitations, as reporting for non-registered MFIs and informal sources or credit are not disclosed and the Credit Bureau therefore maintains only a limited picture.Figure 1: Consolidated Village Data Source Level of Penetration Levels of Penetration Number of Villages Percent of Total Villages Saturated >100% 914 6%Very High Penetration 75-100% 1,260 9%High Penetration 50-75% 2,444 17%Moderate Penetration 25-50% 3884 28%Low Penetration <25% 4780 34%No Service 0% 791 6%Grand Total N.A. 14,073 100% Source: Cambodian Institute of Development TONGTIN OF CAMBODIA – HISTORY AND STRUCTURE For centuries, people have formed informal groups to pool their money for purchase of goods, savings, orinsurance in the absence of formal financial systems. In the microfinance industry, these informalassociations where a core group of participants make regular contributions to a fund which is distributed in whole or in part to each contributor in rotation as a “rotating savings and credit association” or”ROSCA”. The earliest documented forms of saving and loan clubs originated in Italy in the 17th century under the name “tontine” where members had an opportunity to save or borrow through their contributions to the group fund. The tradition of community based financial self-help groups continues today under the names “tontine” in Asia, “susu” in Africa, or “tandas” in parts of South America. While their characteristics can be quite varied, a typical ROSCA involves a self-selected group where members agree to contribute a fixed sum at regular intervals (daily, weekly, monthly, etc.) and then distribute the”pot” at each interval using a pre-agreed system of distribution. The primary methods for distribution of the “pot” are use of a pre-determined order, member vote at each interval, lottery, or a bidding process6 Liv, D. (2013). Study on the Drivers of Over-Indebtedness of Microfinance Borrowers in Cambodia: An In-depth Investigation of Saturated Areas. Phnom Penh, Cambodia: Cambodia Institute of Development Study P a g e 5 | 23THE CITY UNIVERSITY OF NEW YORK(Rutherford, 19997). The group is organized and managed by a leader who typically receives the “pot”first and then collects and distributes funds at each group payment interval. Participants could berecruited through workplace connections, community connections, an affinity group, or through a friends and family network. The ROSCA will continue for a number of intervals equal to the number of participants so that each member has an opportunity to win the “pot”. Each member has an opportunity to receive the “pot” based on the pre-agreed system, and members can win the “pot” only once during the cycle. (Ledgerwood, 19998) Variations exist where members elect not to receive the “pot” during the cycle, and instead receive the “pot” at the end of the cycle because they intend to use the group only as a mechanisms for savings. In a simple non-bidding ROSCA, members will only receive an amount equal to the sum of the agreed group contribution, and effectively receive zero or negative interest considering the time value of money. In a bidding ROSCA, the potential pay-in per week and pay-out of the pot varies and the members have an opportunity to earn interest or borrow at variable rates based on bidding. All ROSCAs are trust based groups that rely on peer pressure to enforce ongoing participation in the system.If members drop out, future payments to players who have not received the pot are jeopardized. In addition, there are other transaction costs associated with ROSCAs such as member transportation or opportunity cost to attend the regular meetings or the leader’s costs for refreshments or other organizational aspects of hosting the meeting. In most cases, there is also a social significance assigned to belonging and participating in the group.The “tongtin” of Cambodia is derived from the term “tontine” and typically follows the model of a”bidding” or “auction” ROSCA. Under this system, the leader recruits a group of participants to start the fund, establishes a periodic contribution amount, and sets a regular meeting interval for future collection and auction of the pot (for example weekly). The leader receives the “pot” first, and usually circles the fund because he or she has an urgent cash need (purchase of a loom, children’s school fees, a large health expense). In the subsequent weeks, members will continue to make contributions which are variable based on a sealed bid auction process run by the leader. Members submit their bid to the leader on a slipof rolled or folded paper, and the leader selects the best bid to win the pot. The best bid will be conveyed7 Rutherford, S. (1999). The Poor and Their Money: An essay about financial services for poor people.Manchester,UK: University of Manchester.8 Ledgerwood, J. (1999). Microfinance Handbook. Danvers, Massachusetts: World Bank.Participant Cash Flow: ROSCA with lottery allocation Week 1 2 3 4 5 6 7 8 9 10 TOTALPayment to Leader $100 $100 $100 $100 $100 $100 $0 $100 $100 $100 $900Payout to Participant $900 $900Payout minus contributions: $0Assumptions: 10 member ROSCA, $100 weekly contribution, player wins the pot in a lottery week 7P a g e 6 | 23THE CITY UNIVERSITY OF NEW YORK as an interest figure, which is actually the discount the member is willing to receive that week off the face value of the typical contribution amount. For example, in a tongtin with a weekly payment of $100, a winning bid of $15 means that the members contribute $85 per person that week instead of $100 perpers on to the winning bidder. In the case of a tie, the members must bid again until a winning bidemerges. Once a bidder has won the discounted pot, he or she must contribute the full face value of the$100 weekly payment regardless of future winning bidder figures. Members can bid every week until they win, but are not required to bid at any time. In this way, members who do not win the pot earn interest(in the form of reduced weekly contributions but a full payout at the end) which varies per period based upon the value of the winning bid. The winner’s interest rate (or the discounted pot sum) is also variable based upon the competing bidders in any given week. Not all members are required to bid, and there are net savers and net borrowers in the tongtin system. Due to bidding it is impossible for participants to know their weekly contributions, savings interest rate, or borrowing cost ex-ante , or if they will ever be successful in winning the “pot.” It is also the case that tongtin groups can be quite large, with over 100participants. While conducting field interviews in Cambodia for this case, a few participants mentioned that their groups were so large (over 200 members) they could not keep track of where they were in thecycle or when these tongtin groups were ending. Many members do not record the payments they makeor the specific amounts and rely on trust that the system is working. For long-running groups, leader shave been known to conduct annual book reconciliations or audits to maintain the integrity of the tongtin finances. The risk of defecting members is also real, and in field interviews for this case study, participants told us that they had experiences where members and leaders of tongtin had run away with the money and ceased participation part way through the cycle. Despite these negative experiences, most interviewed participants said they continue to play tongtin and take greater care to select “good” leaders.

All of the factors mentioned introduce uncertainty and risk into the tongtin process. Regardless,participation in tongtin spans all walks of life in Cambodia and is deeply embedded in the culture.

According to a university research paper by Man Hau Liev, Cambodians believe tongtin is an easier alternative to save or borrow money, as compared to the hassle of complex processes in banks.”Participants in Cambodian tontines believe that the returns from tontines are higher than those available from other saving methods,” wrote Hau Liev. “To them, a tontine is a familiar financial instrument within their ethnic communities.” (Phnom Pehn post) In addition, during field interviews for this case study,participants reported that it was important for them to participate in tongtin to support their friends and neighbors and in this way help their community.

P a g e 7 | 23THE CITY UNIVERSITY OF NEW YORK The tongtin groups observed in Koh Krabei during primary interviews for this case study follow the auction process described above, and had some additional significant characteristics: semi-formal organization,multi-player members , and leader as underwriter.First, Koh Krabei and neighboring villages generally inform the village chief and sometimes the commune chief when forming a tongtin group. Next, the leader creates a document with the tongtin rules and members sign using finger prints to acknowledge membership. The village chief will also sign the list of members as a form of registration for the group. This process did not have a legal significance as far as we know, but did appear to enhance the accountability and social pressure to perform in the tongtin group. One participant mentioned that she could have approached the village chief as a advocate to helpher collect tongtin funds.Second, tongtin members can participate as multiple players. This could mean double or triple contributions and payouts if one was participating as two or three players. A net saver could enhance their interest earned, and a net borrower could achieve a large lump sum payment by bidding and winning twice or three times. However, neither can know the ex-ante costs or rewards of these decisions and the volatility of their cash flow into and out of the tongtin is increased by participating as a multi-player Participant Cash Flow: ROSCA with bidding allocation, participant as borrower Week 1 2 3 4 5 6 7 8 9 10 TOTAL Payment to Leader $100 $90 $95 $75 $85 $85 $0 $100 $100 $100 $830Winning Bid N/A $10 $5 $25 $15 $15 $20 $15 $10 $5Payout to Participant $740 $740Payout minus contributions: -$90Assumptions: 10 member ROSCA, $100 weekly face value contribution, bid represents discount from face value of contribution,player wins bid in a lottery week 7, winner receives face ($100) minus bid value ($20), or $80, from each member except the leader who contributes face ($100), winners must contribute face ($100) in all periods after winning,Participant Cash Flow: ROSCA with bidding allocation, participant as saver Week 1 2 3 4 5 6 7 8 9 10 TOTAL Payment to Leader $100 $90 $95 $75 $85 $85 $80 $85 $90 $95 $880Winning Bid N/A $10 $5 $25 $15 $15 $20 $15 $10 $5Payout to Participant $900Payout minus contributions: $20Assumptions: 10 member ROSCA, $100 weekly face value contribution, bid represents discount from face value of contribution,player never bids to win the pot

P a g e 8 | 23THE CITY UNIVERSITY OF NEW YORK member. The ability of one person to participate as multiple players also introduces a customerconcentration into the risk pool for the tongtin leader.Third, most members told us that the leader also acts as a partial underwriter. If a member fails to make the weekly payment, the tongtin leader will make the contribution for them (and presumably pursue that person for back payment outside the group). There is a practical limit financially to how many defectors a leader can cover, so this is not an unlimited guarantee by the leader. However, most participants when asked if they were concerned about defectors and losses, indicated that they were confident that the leader was sound, had selected good members, and would cover the payments of defectors. Members also reported that leaders can go to the home of tongtin defectors and take items of value in lieu of cash payment (e.g. cows, motorcycles). Again the limit to this strategy is in fact the limited assets of the participants in this geographic area.THIDA’S HOUSEHOLD CASH FLOW PROFILE: JUNE – NOVEMBER 2013

Thida, approximately 50 years old, lives in Koh Krabei village with her husband, two sons and three daughters. She and her husband, assisted by their oldest son, are farmers who maintain the jasmine growing and harvesting activity which is the primary source of income for the family. Her oldest daughter is a physical therapist who works in the city and sends money back home, and the other three members of the family are still studying. Her husband sporadically works as a tractor broker who connects farmers in need to tractor owners/lessors. In addition to his family farming activities, the oldest son works as apart time cook in a village café.Cash flow from the jasmine growing generates on average $71 per week, with spikes at times of religious ceremony and celebrations which require jasmine flower ornamentation. There is a wide variance in weekly income over the course of the last six months, including some zero income weeks.6moTotal(US $)Median(US $)Std. Dev.(US $)Mean(US $)% ZeroWeek1650.65 50.75 62.58 71.77 9%Jasmine farming is common to Thida’s village (see Exhibit 3 for cash flow results of neighboring farmers).

She does not maintain any significant inventory as jasmine is a perishable good that can only be kept for about one week before spoiling. Loose jasmine and decorative jasmine ornament sales occur daily at the nearby market or pagodas (religious temple where jasmine is used in ceremonies). There is also some seasonality in the business. During the rainy season from May to October, the jasmine bushes produceless flower buds, thereby limiting supply and driving up prices. Major festivals also drive up demand and prices. She also periodically receives remittances from a daughter who works in the city ($500 over thepast 6 months.)

P a g e 9 | 23THE CITY UNIVERSITY OF NEW YORKThe household is not able to meet its weekly expenses, with income covering food and miscellaneous costs on average four out of the seven days per week. The household often turns to family members suchas Thida’s sister for help and maintains no savings. Assets are limited, and primarily consist of materials to maintain and harvest the jasmine, a basic motorcycle (“moto”) which is used by the family members to get to and from work, school or the market, and the family home. The land her home and farm are located on has already been pledged against a loan to a microfinance organization.Household Cash Flow Chart Source: Adapted from field research study (Sze, 2013)In order to meet the cash flow shortfalls, Thida’s household has obtained a number of loans, both formal and informal, and relied on gifts of stores of rice and other creative measures to get by.

MFIs have frequently visited her village, and held meetings for the village to learn more about their products. On other occasions, MFI staff have come to her home to tell her about products and services.

In a few cases, she took out a loan with the representative making a home visit.She currently has three outstanding MFI loans:• R400,000 loan ($100 equivalent), 25 week term, 20 weeks remaining, pays R22,000 per week($5.50 equivalent), no collateral, used for general family cash needs• $300 loan, 1 year term, 11 months remaining, pays $30 per month, no collateral, used to partially pay daughter surgery expenses• $3,000 loan, 3 year term, 2.25 years remaining, pays $120 per month payment, collateral in the form of land title, used to partially pay daughter’s school fees(6,000,000)(4,000,000)(2,000,000)-2,000,0004,000,0006,000,0008,000,0001-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-NovThida’s Household Cash Flow TOTAL INFLOWS TOTAL OUTFLOWS Net Cash Flow

P a g e 10 | 23THE CITY UNIVERSITY OF NEW YORK In addition, Thida believes it is important to participate in tongtin to support her friends and neighbors who have financial needs. When a neighbor who was starting a tongtin group to raise money for her son’s school fees, she recruited Thida who was happy to join to support her neighbor and earn some interest on her money. The members of this group are doing better than her financially, giving Thida confidence that the group will remain liquid. The tongtin groups she participates in today were organized by a middleaged woman her relative introduced her to from a neighboring village, a middle aged farmer in her village,and a young jasmine seller in a neighboring village. In general, Thida believes she has earned good returns on tongtin funds contributed compared to the hassle and low rates associated with depositing money with the bank. These days, she does not have extra money left over to save and is glad to be in two tongtin groups where she has not yet won the “pot” so that she can bid and receive the money to help her with emergencies. She has already won the pot in the tongtin with the leader based in her village and it was expensive. Still, it was a very quick process and she did not have to wait for the MFI representatives to come to the village to get help. The is using the young woman’s tongtin for savings, but unfortunately 10people have already run away from that group. She bid and lost the tongtin managed by the middle aged woman a few times, but would have used the funds to make payment for daughter study, repay an MFIloan, and buy parts for a water pump to improve jasmine production.Her current tongtin groups are as follows:• 90 members, $5 weekly contribution, has not received the “pot” yet, 35 weeks remaining• 60 members, $7.50 weekly contribution, has received the “pot”, 10 weeks remaining• 60 members, $12.50 weekly contribution, has not received the “pot” yet, 18 week remaining Over the past year, she also obtained a $50 loan from a loan shark (related to the daughter’s surgery), and another $150 loan from her aunt. She has paid off the emergency $50 loan shark obligation with adonation from her daughter’s overseas financial sponsor. Terms of repayment for the loan from the auntare not defined and there is no explicit agreed interest payment.Today, she is feeling the weight of the significant burden of loan interest and tongtin payments which now comprise about 70% of her average household inflows.DECISION TIMEThida is not confident in her crop harvest potential due to the crop infestation, and her family is not ableto fill the gap. She does not want to disappoint her group and face future exclusion from tongtin clubs.The loan shark and her tongtin will both be expensive in terms of interest cost relative to a microfinancebank loan. Faced with defaulting on her payment for a Tongtin group, Thida takes out a new $80uncollateralized 25-week loan with $4.50 weekly payments with the visiting MFI that has come to her home in the village.

P a g e 11 | 23THE CITY UNIVERSITY OF NEW YORK QUESTIONS FOR DISCUSSION1. Did Thida make the right decision?2. Is the microfinance loan a complement or substitute for the informal Tongtin financing club?3. What risks does the Tongtin participation pose to the client, and what can she do to reduce those risks? Why do you think Thida continues to participate in the tongtin despite the risks?4. What risks does the Tongtin participation pose to providers of microfinance services, and whatcan microfinance providers do to reduce those risks?5. What financial products in the formal sector is tongtin most similar to?6. What are some of the reasons clients like Thida would use tongtin for savings or loans?7. What financial products in the formal sector would be most appropriate to address Thida’svarious cash needs and why?8. Are there other products, services, or actions that could have prevented Thida’s cash crisis?9. How does the availability of multiple sources of capital impact client decision making?10. How can Thida break the cycle of paying off existing loans with new indebtedness?

P a g e 12 | 23THE CITY UNIVERSITY OF NEW YORK EXHIBIT 1Map of CambodiaP a g e 13 | 23THE CITY UNIVERSITY OF NEW YORKEXHIBIT 2Koh Krabei Village of CambodiaKoh Krabei is situated in the southeast of Phnom Penh across the river from the city. Phom Koh Krabeibelongs to Prek Thmei Commune, Mean Chey District of Phnom Penh.These village has daily gross domestic product of $2.58, which is favorable compared to half of Cambodians living on lss than $2/day. During field research interviews in 2013, the team observedpolitical stability and good infrastructure, such as viable road and high access to electricity.The villagers grows mostly jasmine, which supplies Phnom Penh’s ceremonial and religious needs.According to an article by Phnom Penh Post (2009), Koh Krabei is famous for having many jasmine farms.Most farms will sell their produce to wholesalers who go to the markets in Phnom Penh to sell them to tea makers. However, each week most households would send a family member to sell jasmine wreaths and ornaments in the markets or Pagodas. Jasmine is a crop that will provide fresh flower buds almost daily, and it is closely tied to the culture of Cambodians.Other crops include, papayas, bananas, longans, and oranges. During important events like weddings,festivals, Khmer New Year, and Pchum Ben, where demand would exceed supply of jasmine flowers,villagers can reap a very high profit.

Figure 2: Google Map of Phnom PenhP a g e 14 | 23THE CITY UNIVERSITY OF NEW YORK Source: Field Research -Description Koh Krabei Population (2010) 5,191No. of Chamkar farmer families(2010)9785Main Occupation(Commune level, 2010)Long-term crops Access to electricity(Commune level, 2010) 97.11%Small-scale food shop businesses (Commune level,2010)31Rice production per capita(Commune level, 2010) 2kg/person9 Chamkar land is land that is used to grow a variety of crops.


Major MFIs in Cambodia Sorted by Loan Book Size:Source: Mixmarket.orgP a g e 16 | 23THE CITY UNIVERSITY OF NEW YORK Lending methodologies There are three main types of credit that is provided by MFIs in Cambodia – individual loans, solidarity group loans, and community bank loans (Vada, 2010) (Kredit Microfinance, n.d.). The individual loan the largest form of credit provided by the MFIs, but it typically requires collateral and guarantor to reduce the default risk. They are first evaluated by a MFI credit officer, who interviews the client, his or her neighbor,and village chief.The second type of credit is the solidarity group loan, where the borrowers form groups to borrow money together. If one person in the group defaults, the entire group is deemed as in default as well. The group loan reduces the problem of adverse selection—where the MFI does not know if the client is credit worthy and the problem of moral hazard—where the MFI cannot observe if the loans are put to good use or carelessly frittered away (Ledgerwood, 1999). As a result, groups will now look for people they trust to take the loan together, and also look out for eac………


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