Most of the clients I visit make just enough money from their businesses to get by day to day.  When you ask what their future plans or hopes are, some have none in sight- just repeating the same monotonous labor, day in and day out, to continue to put food on the table… challenging enough with the rising food inflation here (http://www.voanews.com/english/2008-04-21-voa21.cfm).  If family members are sick (with an 8+ member household in a developing country- odds are someone will be sick), medical costs can make this prohibitive and put business activity on hold.  That’s where Maxima often steps in with loans for start-up capital so the families can resume their business operations:

 

 

The great success stories come in when clients’ businesses have taken off to the point where they have excess—enough for monthly savings.  Realizing the villagers never invest this money into a savings account, I thought this was a greatly missed opportunity to turn interest…. until I found out about Cambodian gambling.

                               

Cambodian gambling, or tontin, is a “game” that villagers play when they have extra money.  A tontin leader will form a group of friends or neighbors who pool their money into group savings.  Much like a group loan, members take turns borrowing, starting with the group leader (the one in need of immediate capital who established the group).  The twist comes becomes members can negotiate with each other to decide the interest rate they’ll pay, as well as the rate at which they’ll agree to be repaid.  Depending on the timing, circumstances and loan use, they may vary.  Playing tontin, members administer a self-regulated borrowing network.  The network acts as an insurance system to provide members reserve funds in times of need or emergency, as well as a savings system and means to earn interest each time another person borrows.

 

While occasionally members will skip town with the money, this is rare.  Rather, because members select each other from among friends and neighbors, they feel the system provides the best way to insure their money is safe and secure.  Many villagers feel it is safer with each other than with a bank.  In the ‘90s, Cambodia faced a meltdown with financial institutions.  Banks were established overnight with minimal capital, and after collecting significant sums of money, they took off with the cash and closed just as fast as they opened.  While the NBC (National Bank of Cambodia) now sets minimal capital requirements and the system is much more regulated, the scams are still too recent to be forgotten.  Villagers burned by the past are still reluctant to trust the financial institutions with their investments and consider their self-made institutions more reliable and accountable.  Not to mention, depending on their luck at the negotiation table, the interest rates can be even more favorable.

 

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