Local human rights NGO Licadho released a report showing that migrant workers often had to migrate overseas to find work to pay off loans from microfinance institutions, and in some instances the lenders encouraged migration.

The report, titled “Driven Out: One Village’s Experience with MFIs and Cross-Border Migration”, was released on Tuesday and reports a link between the 1.2 million Cambodians working overseas and over indebtedness in these mostly rural families.

The NGO used a village in Banteay Meanchey province with high rates of migration to illustrate its findings, asking open-ended questions in a confidential survey administered to 30 of nearly 60 households last September.

“All the money my children send me goes to debt. After I pay off my MFI debt, I will not let my children go to Thailand again,” reads an unattributed quote in the report.

The findings show that 23 of the 30 respondents said their microfinance debt was the primary cause of migration. The lack of economic opportunities in Cambodia, which was the second most common reason given for migration.

Most respondents reported feeling “scared”, often because they were worried about repaying the microfinance institutions (MFIs). Two of the families had sold land to repay their debts and many others were also planning on selling land to pay back their lenders, Licadho reported.

The report shows that credit officers pressured families by specifically referencing the sale of their land to repay loans, even encouraging family members to migrate in order to get a loan.

One respondent said a Prasac loan officer, a local MFI, had threatened to sell their land if the borrower could not repay, and in another case, a Sathapana credit officer, another local MFI, asked respondents to lie about why they needed the loan. They took the loan to pay another MFI loan from Amret, according to the report.

Naly Pilorge, Licadho’s director, said in a statement that the report illustrated that “far too many” families had no option but to leave the country to repay their debt, an issue which was unfolding with the current COVID-19 pandemic.

“Now, with tens of thousands of former migrant workers unable to work in Thailand due to COVID-19, the government and MFIs must help these borrowers by suspending repayments and returning land titles,” she added.

Licadho’s report called for a three-month freeze on all debt repayments and interest accruals due to the COVID-19 pandemic, a return of all land titles being held as collateral and establishment of debt relief programs, including debt forgiveness.

Thailand is home to around 1.2 million Cambodian migrant workers, according to Cambodian government estimates, a significant number of whom are undocumented. Government figures suggest there are around 1.3 million migrant workers in total, the remaining are mostly in South Korea and Malaysia.

A 2019 International Organization for Migration report showed that a third of migrant workers surveyed were unemployed before leaving Cambodia, nearly half had zero income and around two-thirds moved to Thailand due to a lack of job opportunities in the Kingdom and to earn a better income.

Licadho also pointed to how MFIs were given financing in Thai baht by their funders, many of which are European government agencies. A majority of respondents in the survey reported getting loans in baht, which Licadho said was compounding the link between migration and MFI debt.

The Cambodia Microfinance Association was quick to dismiss the report saying it only looked at “the most critical issues” of migration and “in the most affected area”, and to link it to MFI debt was “an unfair judgment and paints a bad image of Cambodia MFIs.”

Kaing Tongngy, spokesperson for the Cambodia Microfinance Association, said the report highlights issues in areas with the highest migration rates. He said MFIs had provided Cambodian borrowers with formal lending services, enabling their freedom to take up opportunities in other countries like Japan, Thailand and South Korea.

“By providing formal financial services, Microfinance Institutions have been empowering Cambodians with freedom and choices to do what is/are best for them,” he said.

“Such services allow many Cambodian are able to take up the opportunities to work in other countries such as Japan, Korea, Thailand and other countries- not migrate to pay back MFIs.”

He also distinguished MFIs from loan sharks and private lenders, saying they charged high rates of interest potentially pushing people in over indebtedness.

Chea Serey, director-general of the National Bank of Cambodia, could not be reached for comment on Monday and Tuesday. According to a National Bank of Cambodia report issued in late April, there are 83 MFIs in Cambodia.

VOA Khmer spoke to San Sokhan, a villager in Kampong Thom province’s Krayea commune, on Monday who said he used to work in Thailand as a fisherman but had returned on April 4 fearing the novel coronavirus pandemic.

He said it was hard to find work and was getting some irregular work on a cashew farm, earning at best $7.5 a day.

“Here, the work is not regular. Sometimes, I have work to do, sometimes not,” said San Sokhan. “I am concerned that I have nothing to eat,” said Sokhan, 34, the father of three children.

He had to repay a loan of around $1,500 from Vision Fund Microfinance, which he took to invest in a different cashew business last year but it was not successful. He then had to migrate to Thailand to pay the debt.

“I still owe money so I have to go [Thailand] when the situation is better,” he said.

On April 20, the National Bank of Cambodia has asked all financial institutions to cooperate with postponing loan repayments and interest reductions in light of the pandemic.

Last week, the 135 civil society organizations urged the Cambodian government to ensure that microfinance institutions immediately suspend all loan repayments and interests for at least three months. This, they said, was “necessary to ensure that people can survive this crisis without risking their health or homes.”

In response to that statement, the Cambodia Microfinance Association and Association of Banks in Cambodia said the statement “does not reflect the real situation and is adversely affecting the banking and financial sector.”