FAO in Cambodia

No more migration from the village with farmer-owned banking (IGRF)

Lim Bona, 34, in his cucumber field

Prey Veng, Cambodia, 24 January 2018 – Adopting traditional practices, a married man with two children, Lim Bona, 34, has become a farmer, using skills taught to him by his parents.

Settling down in Prey Veng’s Ba Phnom District, Kleang village, Buna and his family depended on food and income from the rice they harvested once a year during the rainy season. Standing at the intersection of two major rivers, the Mekong and Tonle Bassac, enables two harvests each year for a large part of Prey Veng Province. Despite the conditions favorable for more productive agriculture, the lack of capital prevented Buna from developing his business.

To earn enough extra income to support his family, including his parents, wife and to send their two children to school, Buna would go to Phnom Penh every year to work in construction or as a motorcycle taxi driver. But in 2013 when the village chief introduced the village to the Project for Agricultural Development and Economic Empowerment (PADEE), his prospects improved dramatically.

“Since 2014, my life changed,” Bona said and adding that, “I could not imagine that I could stay home together with my family and be able to generate a full income from our 2 hectares of land.”

Bona decided to spend time studying with the project. He participated in financial literacy trainings provided by the Food and Agriculture Organization (FAO), and learned new farming techniques, delivered by the General Directorate of Agriculture (GDA) of the Ministry of Agriculture, Forestry and Fisheries (MAFF). During that time, his wife also participated in nutrition and gender trainings. The knowledge motivated Bona and his family to further engage with the project. Then, he became a member of the Improved Group Revolving Funds (IGRF) in his village.

The PADEE project, a joint effort of the Royal Government of Cambodia, through MAFF, FAO and two other partners, is provided with financial support from the International Fund for Agricultural Development (IFAD) over a 5 year period. It aims at fighting against poverty by improving agricultural productivity, and diversifying rural incomes. PADEE reaches out to nearly 50,000 farmers, considered as marginalized, and who live in rural area. PADEE provides farmers with access to financial services, together with skills to start businesses in the farming sector.

FAO led a number of training workshops for farmers, focusing on financial literacy. As much as 984 IGRFs with 50 members per group were formed, with USD 12,000 provided for each group as a conditional grant. Members were allowed to receive loans from this IGRF and to save as much as they liked with the group. These loans were made without the need for farmers to pledge any collaterals (pledging an asset like a plot of land, equipment or cash to cover the risk of the lender), which is desirable for the rural poor, who can’t afford it. The finance supports farmers to start investing in farming and/or creating alternative jobs to the benefit of the whole family.

“I made the right decision to get involved in the project and to be a member of the IGRF,” said Bona with a smile, as he recalled the first time he borrowed money to invest in growing watermelon, the first investment Bona made with a loan from his group. As a result, he earned KHR 3 million (around USD 750) from growing watermelon on 1.5 hectares of land, with the whole farming inputs costing him close to one million riel (around USD 200), for seeds and fertilizers.

Bona says that the loan was necessary to support his new plan and that he could not have started without it. “I am so happy with the result. Later on, I increased the loan to KHR 2.5 million, to buy fertilizers to boost my rice yields. I also grew watermelon, which allowed me to increase the area from 1.5 hectares to close to 2 hectares of land, adding cucumber to the mix. I started to raise five pigs in 2017, a new job for my family,” Bona said with a smile, recognizing the good progress of his family’s business.

“I am so grateful to the IGRF. The trainings particularly, brought me news ideas, confidence, and knowledge to generate and manage my savings.”  Bona used his profits to invest in growing rice two times per year. In a few years, the surplus savings allowed Bona to buy a motorbike and one cow. Life is getting busier for Bona’s family, but everyone is happy with the result. And he no longer has to make the annual migration to the capital for extra income.

Bona’s neighbor, Mrs Vao Sovan, a married woman with three children, who is also an IGRF member in the village, has had an even better result. With the loan and knowledge she gained, she and her husband started growing watermelon on her two hectares of land.

“Without the IGRF, I wouldn’t dare to start a new farming activity. I lacked both financial means and technical knowledge. And, I wouldn’t borrow from the microfinance nearby, as it requires some sort of asset (the “collateral”) from us. Besides, I think the loaning process itself would be very difficult for me to follow. But with IGRF, I was ready to start and got very good results,” said Sovan, referring to the USD 2,000 she got from the very first investment in growing watermelon back in 2014.

While Bona has enough to feed his family with more nutritious food, and that he can stay with them all year long, Sovan plans to increase her savings with the group and expects to be able to invest in her children’s education in the future.

Despite this good result, both Vanna and Sovan are still concerned with external risk factors: unpredictable weather pattern as well as a volatile market that would decrease their profits. “Unpredictable rainfall and market prices are the main challenges for us now, as we are not able to control it,” added Bunna.  

Currently, the IGRF in Kleang village has a capital of more than KHR 76 million in the nearby bank, named Amret. The capital serves the small scale financial needs of the IGRF members for their livelihood activities in agricultural production and urgency with less transaction costs and alternatively to the microfinance institutes and informal local credit systems with higher interest rate.   

Along with this inspiring story, it is expected that the technical assistance under the framework of PADEE will contribute to improve the livelihoods, income generating capacities and food security of 68.200 poor rural beneficiary households in 246 communes of 33 districts in the five selected provinces, namely Kampot, Kandal, Prey Veng, Svay Rieng and Takeo, through the improved access to rural financial Services and agricultural technology, and markets.