Mired in debt, Sok Khim and her husband Kai Vai face losing their land and business. They are far from alone.
The couple, in their 50s, run a roadside restaurant in Kampong Speu, a province west of Phnom Penh that has the highest number of microcredit loans in Cambodia.
"Many people, maybe 90% here, are in debt," Vai told the Nikkei Asian Review. "Some of them are able to sell their land and pay back their loan. [The lender] warned us they will just take the land for free if we do not sell it."
Even before the COVID-19 pandemic, Cambodia faced what one expert called a microfinance "crisis." Now, with the country's vital apparel and tourism industries threatened and the new coronavirus battering the global economy, fears are growing that major job losses could trigger a collapse in the sector.
Cambodia has more than 2.6 million microfinance borrowers, with loans exceeding $10 billion, according to Cambodia Microfinance Association figures seen by Nikkei. It has the world's highest average microloan debt per borrower at around $3,804 -- more than double the country's gross domestic product per capita.
"The situation in Cambodia, specifically, is very risky indeed," said Milford Bateman, a professor of economics and development studies who is an expert on microfinance institutions (MFIs).
The Asian Development Bank has forecast Cambodia could be among the hardest hit in ASEAN -- the Association of Southeast Asian Nations -- by the economic fallout from the coronavirus.
Highly dependent on China, Cambodia's tourism sector could lose between $345 million and $856 million, the lender estimated. Its $10 billion apparel export sector, which employs more than 750,000 people, has faced mass order cancellations, an industry representative said.
"We can pay back our debts because we have children that work in the factories," Pa Ven, a village chief in Kampong Speu, told Nikkei last month. "If they can't work in the factories, where else can they get money?"
Debt stress has been brewing for many Cambodian borrowers. In 2018, the International Monetary Fund warned the MFI sector was increasingly a risk to the economy's health due to its "systemic importance."
Presenting to the UN Human Rights Council earlier this year, independent debt expert Juan Pablo Bohoslavsky described the situation as a "microfinance crisis," writing that most such loans were for "nonproductive purposes" such as spending, paying interest and for health care.
Cambodia has announced measures to prop-up credit providers, including low interest state loan of up to $600 million announced this week by Prime Minister Hun Sen to banks and MFIs to supply low-interest credit.
As concern grows, a focus is a UN-backed "women's empowerment" bond that uses proceeds from private investors to loan to MFIs and "impact enterprises" in Cambodia, India, Indonesia, and Sri Lanka.
The Singapore-listed $12 million bond, which offers 4% interest, is the second in the Women's Livelihood Bond series developed by Impact Investment Exchange (IIX), a group based in the city-state that advocates socially responsible investing. Some $6 million from the bond is being directed to three MFIs and one rice miller in Cambodia.
But critics question whether injecting money into MFIs will help women escape poverty, saying that some questionable practices in the for-profit sector trap borrowers in a cycle of debt and funnel money to managers and shareholders.
Nathan Green, assistant professor at the National University of Singapore, who researches MFIs and has done fieldwork in Cambodia, said the sector lacked consumer protections.
"Loan officers are concerned about repayment, but they're under a lot of pressure to lend, which is why they push new, larger, refinanced loans," Green said.
He said it was incredible that despite research highlighting problems caused by microfinance in numerous countries the sector was "still considered to be this respectable destination for social investment.
Impact Investment Exchange (IIX) said in a statement that its loan recipients use the money to provide opportunities for women from poor communities and undergo "rigorous and transparent" assessment, including field visits to end borrowers.
Cambodian human rights NGO LICADHO and Sahmakum Teang Tnaut (STT), another rights group, released a report showing how reckless and predatory lending practices within the MFI sector lead to coerced land sales, debt-driven migration and child labor.
With the majority of the country's MFI loans collateralized by land titles, the tenure of thousands of borrowers was at risk, said LICADHO director Naly Pilorge.
"It is difficult to see how any investment in MFIs in Cambodia can have a positive social impact at this time," Pilorge said.
The Women's Livelihood Bond series is supporting three Cambodian microfinance institutions, including LOLC Cambodia, which was cited in the LICADHO/STT report for two cases of using "unacceptable" pressure tactics.
Last year, Nikkei spoke to an illiterate woman who said she was pressured by LOLC staff into signing loan paperwork.
At the time, LOLC Cambodia said it did not allow such practices by its credit officers but did not respond to follow up questions emailed this month.
Impact Investment Exchange (IIX) said it had questioned LOLC on the allegations raised by LICADHO and saw an internal report that showed the company was not involved in the human rights violations described.
Meanwhile, Cambodia this week recorded its 109th case of infection. With more emergency measures soon to be announced, Hun Sen recently called on MFIs and banks to waive repayments.
Mey Kalyan, a senior adviser to Cambodia's Supreme National Economic Council, said he hoped lenders would be flexible.
"We cannot kill the goose that lays the eggs. It's time to be patient together and help each other," he said.