OPIC and TPC, local MFI, support home improvement loans for low-income Cambodians, with a nod to architectural past
By Loren Rodwin, OPIC Managing Director of Micro and SME Finance
Traveling through Phnom Penh, one learns quickly that Cambodia is not only a land of great physical beauty, but keeper of a stunning architectural inheritance, too. And how Cambodians keep it: the Khmer-style temples that dot the capital’s avenues are both jaw-dropping in their look and pristine in their condition. It’s only when the traveler gets outside of the capital, to the country’s rural areas, that one finds that an equal measure of house-pride is true of most ordinary Cambodians.
OPIC’s first direct loan to a Cambodian microfinance institution, Thaneakea Phum (Cambodia), Ltd. (TPC), is helping as many as 5000 borrowers play their part in keeping Cambodia’s architectural legacy alive, among its many benefits. At a signing ceremony announcing the $5 million loan, OPIC and TPC announced that at least 50 percent of the funds will be dedicated to TPC’s home improvement loan program, with the remaining funds to support group and individual loans for TPC’s predominantly rural, agricultural clients, most of them women.
As signatory to the loan agreement, I thought the distance traveled from the Raffles Hotel for the signing ceremony organized in cooperation of the U.S. Embassy– with its elegant upholstered chairs, bouquets of yellow roses and green satin sashes – to the modest homes of TPC loan recipients during my subsequent site visits would be unbridgeable, but it wasn’t. Both spoke to the same Cambodian respect for their surroundings.
I only had the chance to meet with two loan recipients, but I was struck by the adherence to the traditional Cambodian architecture in both. It’s something to see, truly: the Khmer style finds its way into rural homes as well as temples: rectangular houses constructed of a wooden frame with gabled roofs, raised on stilts as tall as three meters for protection from annual floods.
The first recipient was Hun Davy, who along with her husband Tit Se, are garment workers in the village of Ang Samrong, Prey Gneat Commune, Kong Pisey District. Ms. Hun is combining a first-time $5000 TPC loan with $3000 of her own family’s money to build a new home for the couple and their two children, six-year-old son Tearny and three-year-old daughter Jasmin.
“We’re very excited about the progress of the house, now that it’s almost done. We’ve been living with my parents while it’s being built. We see the home as having two purposes: not only a place for us to live, but also a property for us to raise chickens and pigs,” Ms. Hun said.
“We’ve had a very positive experience with TPC,” she said. “Our loan officer spent a lot of time with me, explaining the loan terms and documents to me.”
The second TPC loan recipient was Pen Phalla, a grocery store owner and mother of seven who is using a $3000 TPC housing improvement loan to add rooms to her house and build a wood platform so that it meets the traditional Cambodian style. The platform will enable her to expand her store, a ten-year-old fixture in her village.
“I’ve worked with TPC before – I took out two group loans in order to expand my business – and I’ve always had a good experience with them,” Ms. Pen said. “I like this home improvement loan because of its term, which is four years, because it allows me to make affordable monthly payments.”
Aesthetics aside, TPC’s CEO, Arah Sadava, makes clear that the project is not simply geared for a feature story in Architectural Digest.
“Many Cambodians want to use existing income streams to improve their family’s quality of life, but can’t afford to take funds away from their small businesses. In response, we developed the Home Improvement Loan product with a long tenor and small, frequent payments,” Sadava said. “This allows our clients to both grow their businesses and improve their homes. We currently offer the home improvement product in eight TPC branches, and will begin offering it in all of our 39 locations by early March.”
“Home improvement loans also enhance the income generation of home businesses, and reduce economic vulnerability by building the poor’s assets. This is especially important for those in rural areas who do not have access to savings accounts,” she added.
For Fernanda Lima, TPC Board Chair and representative of U.S.-based, socially-responsible investment manager Developing World Markets (DWM), which acquired TPC in 2010 and was instrumental in facilitating the TPC – OPIC partnership, “This investment will increase financial access for the underserved, lower-income segments of the population while directly improving the livelihoods of rural Cambodians. The seven-year term of the OPIC funds allows us to scale a home improvement product with a longer tenor than standard working capital loans. Our partnership with OPIC is a perfect fit, as our organizations have the same goal of leveraging the private sector towards a more prosperous Cambodia.”
For OPIC, the project is the latest step in an ongoing commitment to increasing financial inclusion in emerging markets. As the U.S. Government’s development finance institution, OPIC provides capital to MFIs through investments in microfinance vehicles, targeted credit facilities to individual MFIs, risk-sharing agreements, and guaranties supporting innovative industry efforts. OPIC has committed over $700 million to microfinance projects, which have supported 125 MFIs in 35 countries.
Said OPIC President and CEO Elizabeth Littlefield, “Access to financing is vital to fostering Cambodia’s economic development. Through this microfinancing project, thousands of Cambodians in rural areas will be able to take advantage of business opportunities they might not otherwise have a chance to – and as a result be empowered to improve their quality of life.”