HASu Cambodia, the NGO Equitable Cambodia and the human rights organization Licadho are concerned about the ravages of microfinance. They noted, in a report published in the summer of 2022, that 167,000 over-indebted residents had had to sell their land over the last five years to repay their loans, often after having suffered intimidation from their creditors. Outstanding loans in the sector reached $16 billion (14.88 billion euros) in March 2023, or almost half of the country’s annual gross domestic product.
In Pakistan, the latest figures published by the central bank show that the cumulative losses of microfinance institutions have almost doubled between 2021 and 2022, going from 8 billion to 17 billion rupees (30 million and 72 million euros at the time). ). In July 2023, the International Monetary Fund announced that it “would continue its efforts to eliminate pockets of vulnerability” of this sector in Pakistan, even if it means implementing “the orderly exit from the market of non-viable institutions”.
There are good reasons to be concerned. First, the global rise in interest rates increases the cost of these loans. In Ethiopia, it reached 26%, the ceiling threshold set by the central bank. However, in countries stifled by public debt and forced to reduce their social spending, resorting to microfinance is sometimes the only option for food or healthcare. Between 2020 and 2023, 165 million people around the world will fall below the poverty line. Galloping inflation weighs on the activity of entrepreneurs in the informal sector and complicates their ability to repay. Microborrowers find themselves in distress, but are ignored by lenders.
Curiously, the World Bank, so quick to communicate, gives no information on the fate of the 150 million microborrowers. Even the Consultative Group to Assist the Poor, the research center specializing in financial inclusion that it hosts, explains to World do not have “nothing to share” on this topic. The World Bank’s latest annual report on debt doesn’t even mention it! The institution is more concerned with the debt of States than that of microentrepreneurs. The subject is invisible and therefore appears nowhere on the international agenda.
Threats and intimidation
Since the work of Nobel Prize winners in economics Esther Duflo and Abhijit Banerjee, we know that microfinance does not lift its users out of poverty, and that it has no impact on health or schooling. Despite these mixed results, the World Bank continues to invest heavily in microfinance. According to the latest figures available, its outstanding assets increased from $103.5 billion to $120.5 billion between 2021 and 2022, despite the high risks.
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