Building communities by reducing financial risk

When the families in the central Cambodian village of Rung need cash, they can choose between moneylenders or local microfinance institutions as the source of their loan. Most people dislike both options because the loan terms are quite onerous, and they feel it is too risky to use their scarce assets such as a cow or small plot of land as collateral.

To address this challenge, CWS works with communities to start savings and lending groups that can lend small amounts of money to members with their mutual trust as collateral.

With the encouragement of Soung Dorn, a member of Rung’s Village Development Committee, the first group was formed by 15 women and men in August of 2015. That group is named Sambou Krabao Chrum. Its vision is to reduce the dependency of families on private lenders while making low interest loans available for members in case of emergencies and for income-generating activities.

As a founder of the first group, Dorn actively shared the group concept and the benefit of saving with his community members. This has convinced more families to join in the saving group. Now, the Sambou Krabao Chrum group has had 30 members and four other saving groups have been formed!

Between the five savings groups, there are 125 members who have saved a total capital of 11,055,000 Riels ($2,764 US). The members, who are mostly women, save 5,000 Riels ($1.25 US) monthly. The 2.5 percent interest earned each year will be divided into three parts: 10 percent for administration, 30 percent for group capital and social work, and 60 percent for group members. The long term plan of the groups is to eliminate the need to obtain loans from moneylenders or microfinance institutions and to become the village bank.