Micro Finance as used for Community Development (original) (raw)

2006, Strengthening partnership among academic and development institutions: New Dimensions of Social, Cultural, and Economic Cooperation in the Upper Greater Mekong Sub-region

The Micro Finance System in Cambodia was established at the beginning of the 1990s with the help of Micro Credit Promoters and external aids. The demand for micro credit in Cambodia is largely untapped and the government has strongly encouraged the development of the sector. After the general elections in 1993, Cambodia has become an internationally recognized government; additional foreign support has been available; and a number of Micro Finance Providers have emerged. Royal Government of Cambodia has given a top priority to its social development programs for poverty alleviation in rural areas in order to develop the living standards of the people of Cambodia. At present, there are more than 100 rural financial operators, including licensed Micro Finance Institutions, registered and non-registered Non Governmental Organizations in which most of them are in small size. The main objective of the study is to access the effectiveness of Micro Finance Institutions through assessing the impact of credit supplied by Micro Finance Institutions on the standard of living of beneficiaries. The study has been conducted in two provinces of Cambodia, namely, Kompong Speu and Kompong Chhnang. In Kompong Speu, 83 households received one year loans and in Kompong Chhnang, 51 households received one year loans. All the beneficiaries of one year loans were taken as the treatment group. An equal number of control group members, who did not receive loans from Micro Finance Institutions, were selected from the provinces under study. The control group members were selected by the treatment group members. The study has used three models such as Multiple Discriminating Analysis, Chi-Square and “t”-test to assess the statistical significance of difference between the development loan members and the control group members with respect to cash flow, expenditure, asset position and income and within the developmental loan members before and after the availing of loan with respect to the cash flow, expenditure, asset position and income in businesses and households. The data show that there is a statistically significant difference between the development loan members and the control group members with respect to cash flow, income, asset position and expenditure. There is also statistically significant difference in cash flow, income, asset position and expenditure among the development loan members before and after availing the loan. The study concludes that there was positive impact of loan given by the Micro Finance Institution on the development loan members with respect to cash flow, expenditures, asset position and income in business and households. This shows that the Micro Finance Institution has positively contributed for the improvement in the living standard of the development loan members. The study recommends the following points for undertaking future studies by the researchers: (1) the study could have provided better results if more number of provinces had been covered; (2) instead of confining to one Micro Finance Institution, better results could have been achieved if more number of Micro Finance Institutions had been included; and (3) the future studies should cover different categories of beneficiaries along with different terms of loan supplied by the Micro Finance Institutions.