Original report from Phnom Penh
13 October 2009
Although financial institutions have flourished in recent years, informal credit systems at the village level remain popular for many Cambodians, a practice that could eventually hurt the economy and add risk to both lenders and borrowers, economists say.
Phlong Pisith, who recently completed research for Northern Illinois University, in the US, found that when money is badly needed, many still turn to rich neighbors or local leaders, a system that relies on relationships and confidence between borrows and lenders and is devoid of contracts.
Focusing on Kandal province’s Koh Thom district, where informal credit remains very popular, Phlong Pisith found that informal lending did not even require collateral.
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