Integrated micro-finance: a banking and financial management model for grassroots entrepreneurial development in Cambodia

Poverty exists in all countries, particularly in developing countries. Poverty has profound consequences for every aspect of the lives of people, and its conditions cry out for concerted action. It is, however, not easy to address and solve the multitude of problems arising out of poverty. Neither governments nor donor agencies have been able to eliminate poverty (Smith 2005). Nevertheless, in the last few decades, micro-finance has been used to enable the poor to engage in income generating activities, and provide selfemployment for themselves and their families; in turn this has helped to fight the many negative aspects of poverty. It should be stressed that poverty is a multi-dimensional problem; thus micro-finance alone cannot be considered as a panancea for poverty eradication. To remove extreme poverty there needs to be a comprehensive approach to address the multipler effects of poverty - an appropriate mechanism with which to coordinate all the issues. The premise here is to stress that poverty elimination through grassroots development would require not only financial stimulation and support, but also expanding opportunities and access to education, knowlege and skills development. It is widely acknowledged that microentrepreneurs in Cambodia are constrained by poor health and/or illiteracy, basic business education and other non-financial factors that limit their capacity to utilise credit and even prevent them from accessing the financial services available (Vada 2002; Beresford et al. 2004; Flaming et al. 2005). With respect to the above issues, this research aimed to develop a cost effective, integrated micro-finance model with non-financial services to deliver more comprehensive services to Cambodian micro-entrepreneurs. To the author's best knowledge, such a research has never been undertaken before in Cambodia. This research, unlike many related field researches, aimed to address all the key factors of sustainable micro-entrepreneurship development; that is, both financial and non-financial services. To achieve this objective, this research looked at the world's much acclaimed micro-entrepreneurship development model, namely 'the Grameen II micro-finance model', as one that could be replicated successfully in the Cambodian context. This research was based on a comprehensive literature review, an analysis of the microfinance industry in Cambodia and of the Grameen II micro-finance model, the development of a theoretical framework, and the development of a survey approach. The survey approach was based on personal interviews with carefully selected respondents. This survey included a population of 15 licensed micro-finance institutions (MFIs), four specialised banks, and 15 commercial banks, and a sample of 200 randomly selected micro-finance clients (micro-entrepreneurs) who were clients of the participating microfinance providers. However, out of the 34 selected financial institutions only 23 participated in the survey: 12 MFIs, 3 specialised banks and 8 commercial banks. The overall response rate was 68 percent. In respect to the data analysis, both qualitative and quantiative methods were utilised in this study. This research identified that considerable improvement is still needed if the Cambodian micro-finance sector is to support micro-entrepreneurs' income generating activities. The results from this study showed that most of the micro-finance providers were mainly focused on credit provision, which suggests that the majority of micro-entrepreneurs in Cambodia have not yet been fully serviced by institutional micro-finance providers. The study found that savings schemes, other financial services, and non-financial services such as literacy/numeracy and business training were largely undeveloped. The study also identified a need to provide a wider range of services, which will play an important part in making micro-finance more accessible and will have a greater impact for a greater number of micro-entrepreneurs, who need diverse services. Finding a cost-effective way to reach a larger proportion of the population with multiple services will be challenging. Nevertheless, this study suggests that the Grameen II micro-finance model can be one approach to meeting this challenge. The study revealed that the Grameen II micro-finance model could be replicated in the Cambodian context to provide cost effective, integrated services in order to cater for the diverse needs of micro-entrepreneurs. The study also concluded that the Grameen II model is well suited to the developing of micro-finance initiatives, as well as micro-entrepreneurship in Cambodia. Overall, this study will contribute significantly to knowledge about integrated microfinance models for micro-entrepreneurship development in a developing country. The study helps to consolidate our understanding of integrated micro-finance for grassroots entrepreneurial development and of the field of micro-entrepreneurship generally, and has practical implications for researchers, practitioners and policy makers.