ABSTRACT
This chapter provides an overview of the development and current challenges of Cambodia’s microfinance sector. For decades microfinance institutions (MFIs) have played a key role in enhancing financial inclusion. They have expanded access to finance for rural, low-income, and underserved populations in Cambodia. This process of financial inclusion has contributed to improving people’s livelihoods and economic development. However, as the microfinance sector has grown, challenges have also emerged. High interest rates, borrower over-indebtedness, and inappropriate lending practices in the sector have caused concerns. Other challenges include the need to enhance financial literacy in the population, strengthen consumer protection, and adopt measures to improve lending practices. Moreover, recently, new technologies such as mobile banking and digital payments have also further enhanced financial inclusion, although they can pose more regulatory challenges. Finally, the increase in international capital inflows, especially from commercial investors, has raised concerns about the mission drift of the microfinance sector. This chapter introduces the key themes and provides the foundation for the following chapters of the book in which the development, role, and prospects of Cambodia’s microfinance sector are explored in greater detail.
