The Exclusionary Power of Microfinance

Abstract

In recent years, international banks, investment agencies, and development institutions have created new markets for capital accumulation by rapidly expanding the commercial microfinance industry in the global South. In Cambodia, which has one of the largest microfinance industries in the world, the typical loan amount now exceeds the average annual household income and requires land-based collateral. Cambodian borrowers are increasingly over-indebted, compelling families to reduce their food consumption, take out new loans to service prior debts, migrate, and/or sell their land in distress. In this paper, we investigate this last effect of over-indebtedness, distress land sales. We argue that the exclusionary power of microfinance debt—constituted by collateralized legal contracts, discourses of moral responsibility, and public shame—is driving land dispossession among the country’s most vulnerable people. To make our argument, we draw on ethnographic fieldwork, supplemented by quantitative data from the Cambodia Socio-Economic Survey, MIX Market, and two industry-sponsored large-scale quantitative surveys of over-indebtedness. We trace the rise of the commercial microfinance industry, show how it has contributed to over-indebtedness, and consider how household debts can lead to distress land sales. These land sales have largely gone unacknowledged in the industry because they take place through informal channels rather than the court system. We conclude that microfinance-debt-induced land dispossession in Cambodia is a product of an overly commercialized international microfinance industry that now values profits over people.