Moral dilemma inescapable if investing in microfinance

An ATM owned by Prasac Microfinance Institution in use at a branch in Cambodia’s Kampong Speu province.  Source: Phnom Penh Post

Imagine that you could earn 4.75% interest for a term deposit of only one month.  Might you prefer a one-year term?  That would get you 9.75% per annum, and shorter or longer terms also are available at commensurate rates.

Do those rates sound too good to be true?  They are not.

With such returns offered by Prasac, one of Cambodia’s leading microfinance institutions (MFIs), the wise investor can

If you need to borrow money in a hurry, no problem

In Cambodia, U.S. dollars and the national currency are accepted interchangeably. The note top left, 100 riels, is worth 2.5 cents. Coins do not exist, and paper notes often are grubby beyond words.

It is easy enough for even the most impoverished Cambodian to borrow, say, $10,000, in the event of an emergency such as an arrest that requires bail, a fire that damages a house or shop, or a medical issue.

Paying back the loan is another thing altogether.  And not paying, well. . .

The parallels to the vigorish that the underworld charges in the West are inescapable.  I don’t really know what the criminally avaricious charge elsewhere, but here it is