Challenging the financial inclusion-decent work nexus: evidence from Cambodia’s over-indebted internal migrants

Abstract

In this paper, we question the promotion of financial inclusion, and microfinance specifically, as a means to achieve ‘Decent Work’ (DW) under the International Labor Organization’s (ILO) programme. Drawing upon original research findings from two types of internal migrants in Cambodia, we make a twin contention: first, that excessive levels of microfinance borrowing by garment workers are part-outcome of the failings of the DW programme to engender ‘decent enough work’, and second, that microfinance borrowing is actually eroding rather than contributing to the prospect of decent work for debt-bonded brickmakers in the country. The data presented on two of the largest sectors contributing to Cambodia’s growth in recent decades, enable the paper to show how microfinance and labour precarity are intertwined through the over-indebtedness of workers in both cases. The paper ultimately looks to caution the ILO on its current promotion of financial inclusion and microfinance in particular, stressing the need for significant sectoral reforms before this form of credit can be considered to align with the core principles of the DW programme.

Land Titling and Microcredit in Cambodia: Examining the Reality of Hernando de Soto’s ‘Three Steps to Heaven’

“…Another reflection of the depth of the problem was revealed in a growing number of studies that show the very rapidly rising volume of microcredit in Cambodia is no longer being repaid with income from a functioning microenterprise, as noted already, but is now largely repaid over time thanks to income derived from two other increasingly insecure sources. First, from one or more household members' employment in Cambodia's huge garment sector [85], and, second, from growing remittances arriving from extended family residing in the capital city, Phnom Penh, or outside of Cambodia (especially in Thailand) [86]. In other words, individuals are taking out more microloans in order to survive on a day-to-day basis, but repaying the microloan from the labor of other family members.…”

Who Loses in Financial Inclusion?

“…There are no studies in the literature that examine the losers from financial inclusion. Even in the critical literature, some studies have examined several challenges of financial inclusion such as the potential of financial inclusion to encourage indebtedness (Natarajan et al, 2021); concerns that financial inclusion can lead to the financialisation of poverty (Mader, 2018), and formal lenders violating privacy laws by commercializing the private data of banked adults (De Koker and Jentzsch, 2013;Ozili, 2022b). Despite these challenges identified in the critical literature, the financial inclusion literature has not clearly identified the losers in a financially inclusive society.…”