Regulating Over-indebtedness: Local State Power in Cambodia's Microfinance Market

Abstract

Cambodian microfinance borrowers are suffering from an over-indebtedness crisis. In the past 20 years, the Cambodian government has implemented financial reforms that have commercialized the microfinance sector and promoted industry self-regulation. Echoing long-standing concerns about neoliberal microfinance, critics maintain that these reforms have hollowed out the Cambodian state's ability to regulate a highly competitive market, thereby exacerbating the problem of over-indebtedness. In contrast, based upon 20 months of ethnographic research in southern Cambodia by the author, this article argues that the microfinance market would not function without local authorities performing key regulatory roles of the state. These local authorities include commune councillors — elected representatives of multiple villages — who work closely with village leaders and local police. They are the primary state actors who enforce the property rights and loan contracts upon which Cambodia's microfinance market depends. The author analyses how this local state regulation contributes to household indebtedness by encouraging multiple borrowing, rural out-migration and land repossession. The article advances development studies scholarship on over-indebtedness by demonstrating that the inequitable outcomes of neoliberal microfinance can be better understood, and contested, by interrogating the multi-scalar spaces of state regulatory power.