Financial

A common response to food insecurity, particularly if it is viewed to be short-term or seasonal, is to borrow food or money, rather than dispose of assets, to buy food in order to bridge the gap. Much of the borrowing that takes place in Cambodia is short-term borrowing for food, primarily from relatives or friends. It is usually women who undertake borrowing for the household, though there is often consultation amongst the adult household members before borrowing takes place, particularly if the sums involved are substantial. Many households are quite reluctant to get into debt and will usually borrow first from relatives or friends/neighbours before they have recourse to moneylenders, who charge high interest rates (often 100 percent a year or more). These moneylenders are usually local richer farmers or millers. Often rice is borrowed on the understanding that at harvest double the quantity borrowed will be returned.

More food-secure, wealthier households tend to have a better credit rating and will borrow for input investment (draught animals, water pumps, rice mills or fertilizer/seed), though borrowing in recent years has tended to be for immediate needs and dire necessities rather than for investment. Poorer households, with few assets and little collateral, tend to borrow quantities of food, cash to buy food or cash for medical needs, which is one of the main causes of debt. 

Access to rural credit is essential in order to improve the endowment of farming households with productive capital. Since 1995, the official Credit Committee for Rural Development, under the supervision of the Ministries of Rural Development, Agriculture, Fisheries and Forestry, Economy and Finance, the Council for the Development of Cambodia and non-governmental organisations have been responsible for improving the efficiency in rural credit, strengthening the institutionalisation of private and NGO lending institutions, and mobilising resources from foreign donors. In 1998, the National Bank of Cambodia set up the Bank for Rural Development, responsible for improving micro finance arrangements, supporting the refinancing of existing credit operators, and studying the possibility of meeting credit needs in areas where there is no credit operator. NGO and international organisations involved in rural credit include ACLEDA, GRET, PRASAC, CARERE, UNICEF and CRS.

At present, there are 15 licensed Micro Finance Institutions and around 30 registered NGOs operating throughout the country. The volume of credit provided by those operators is approximately USD 80 million, including ACLEDA Bank (as of the end of June 2004). However, only about 15 percent of rural households are estimated to have access to such credit schemes [1] .

In addition to credit schemes, several "rice banks" have been established and have been popular but have not always been well-managed. These rice banks accumulate and store paddy owned by the producers, enabling them later in the year to draw on stocks for consumption or seed without incurring the kinds of financial loss that would normally occur in post-harvest, low-priced sales, followed by much more expensive "buy-back" later in the year. These have helped with short-term food shortages but have not been so useful where the shortages are chronic.