Introduction
In order to start a business it takes money. For families that live below the poverty line and earn less than $50 per month, it is very difficult to find money to implement a business idea in Cambodia. Currently, there is no banking system where the poor can borrow money without some form of collateral. Often the only option they have is to borrow money from a money lender at such a high rate (80-300% interest rates) that they cannot escape a cycle of poverty. When all profits have to go to repay the loan there is neither money for reinvestment in the business nor extra money to spend on improving their quality of life.

While developed nations have access to fair rate business loans, the poor in Cambodia do not have this advantage. JWOC has created a Microfinance Program to give the poor the ability to borrow money at fair interest rates so they can start a business or expand an existing one. By offering lower rates JWOC hopes that borrowers will be able to build a stronger business and be able to better their lives. Small loans, sometimes as little as $100, in the hands of an ambitious entrepreneur can transform the lives of individuals and families.

Frequently Asked Questions
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How the Loans Work

The Microfinance Program is based heavily after the successful Grameen micro-credit system started in Bangladesh. The lending system gives small business loans up to $100 which requires no collateral on behalf of the borrower. Each potential borrower must submit an application to JWOC describing their business plan or current business, and how the loan will help to improve their business. Based on these applications, JWOC chooses each borrower based on the premise that the borrower will repay in full.

The ideal candidate is an individual with a business idea that will quickly generate some amount of income based on skills that the borrower already possesses. A comprehensive business plan is needed before the loan is made. However, JWOC is willing to work with an individual to take a business idea and help turn it into a viable business. Women consistently turn out in larger numbers for our loan classes and therefore they represent the majority of our borrowers.

Repayments are made in weekly installments, and a JWOC representative visits each persons home or business to collect payments. By doing this, each business owner can continue to manage their business without having to leave in order to make a payment.

Borrowers are eligible for subsequent loans depending upon repayment of the first loan. Many of our borrowers are already on their second or third loans. However, in order to get a new loan after paying off the old one, a borrower must show how another loan will benefit his or her business. As money is collected each week, it is saved to be re-used for future loans.

Steps for the Business Loan

1. Applications are handed out to people with business ideas or a current business.

2. A rating of 1 to 5 is assigned to each application. The highest rated ideas are collected and a personal interview is carried out for each.

3. After the interview JWOC chooses a pre-determined number of applicants based on their business plan and personal interview.

4. Each application is translated into English and kept on file.

5. JWOC gives the loan to each borrower and they sign a contract indicating how much they have borrowed, how much they must repay each week, and their thumbprint to agree to the “contract”.

6. The money will be collected every week and recorded on their “contract” and written down in our records.

7. If the individual repays in full, they will be entitled to borrow higher amounts in the future.

Rates
The initial interest rate for a loan is 2% per month. While high by Western banking standards, this rate is far below the 15-20% monthly interest rates most small business owners currently pay for their loans.

Measurements of Success
From the administrative and banking perspective, repayment of loans is the main indicator of success. With continuing repayments, JWOC can trust the borrowers are able to borrow, save and repay the loan. With repayment JWOC will have that money to reuse for future loans.

Another element of success is evaluating how each loan impacts the lives of individuals and their families. With the help of volunteers, JWOC makes periodic on-site evaluations to assess the benefits of the loans. These indicators include improvements in education of children, health conditions, and living conditions.

An Inside Look into Microfinance

Tong

Before the Khmer Rouge war Tong was a skilled carpenter. During the war he became a government soldier and was stationed in many of the frontline camps and sent out to find the Khmer Rouge. It was one such mission that he kicked a wire lying across the path.

Tong explained that when you step on a landmine it gets your leg but when it is set a meter away one a tree and it explodes it gets you from head to toe. The largest piece of metal went into his leg, leaving him with a permanent limp and preventing him from being able to carry heavy weight so manual labor (which accounts for the vast majority of jobs in Cambodia) would never be an option. Another bit of the mine hit his hand. With that injury he lost the dexterity in his hands and thus the ability to produce the fine woodworking he had done in his life before the war.

While Tong may be a victim of the war, he has five kids to feed, so acting as a victim was never and option. He collects recycling to sell but with an entrepreneur’s eyes. He and his wife saved every bit they could, so they could expand their business. Tong used the Journeys Within Our Community loan plus $150 he had saved up to buy a second hand motorbike.

His motorbike has allowed him to go around town at night to buy the bottles and cans from the bars and bring them to his storage so that he can resell them at a higher price. To make sure he gets the full value out of his motorbike his son uses it during the daytime as a motor taxi. Tong’s profit margin has grown to the point where he chose to pay off his loan in three months because JWOC promised that people would be able to take out additional larger loans as long as the previous loan had been paid back on time, in full. Tong wants his credit to grow as quick as possible because he has ideas on how he can make his business grow quicker.

Tong is the first recipient of the loans to have paid off in full and has requested another loan in order to expand his business further. His ultimate goal is to buy his own truck, which would allow him to deliver recyclables to the facilities at a higher price and manage others who would go out and collect for him.

Kun Nearee

At 23 Kun Nearee is currently the youngest recipient of the JWOC business loan. After she learned how to sow in her hometown of Phnom Penh, she moved to Siem Reap with her mother so she could start a tailor shop.

Starting with one foot operated sowing machine and some space in the front of her home she opened shop. At first most of her jobs were repairing damaged clothes. As she started to develop a reputation she quickly found herself with too little time to make the new clothes that people were asking for.

To be able to make more new clothes, Kun Nearee needed another machine, which could perform a different kind of sewing. Because she did not have this other machine she was very limited in how many outfits she could make in a week and in turn that limited her profit level. This is where the JWOC loan came in.

She borrowed $100 and spent $50 on the new machine that cuts and sows at the same time and the other $50 to buy material for people to choose from. By being able to get through more customers clothes she is able to make more money, even after paying back the loan. She says she too wants to take out another loan when this one is paid off so she can buy more material so more people will want her to design and make clothing for them.

Mian Prek

Mian Prek runs a small business in the village, selling fruits, vegetables, and fish. She lives with her husband and their seven children. Her husband has been suffering from an illness, and is unable to hold a job, leaving Mian Prek to be the sole bread winner for the family.

In addition to the family’s daily expenses, she makes sure to set aside money every day to send her three younger children to school. She applied for a JWOC loan in hopes of making her business more successful, and it has worked. She says she is making more money each day than before and wants to move her business to the local market where she feels she will be able to earn even more She says her next JWOC loan will help her accomplish this goal.