The story of a farmer laden with microlending debt who committed suicide in the remote northeast Ratanakiri province of Cambodia a few years ago illustrates how a private-sector-driven development strategy has gone off the rails in the two decades since its promise won the Nobel Peace Prize for one of its leading champions. The consequences were laid out in a critical 142-page report released in October 2025 by the ombudsman of the World Bank Group’s private-sector arm, the International Finance Corporation (IFC). But even as the corporation accepted the proposed action plan on June 23 this year, it rejected any suggestions of noncompliance, prompting the ombudsman to announce her resignation the next day.
Yet, earlier that month, the World Bank Group — which is holding its annual meetings with the International Monetary Fund in Bangkok this week — adopted a new strategy that would expand the job-creation and business-development role of private-sector finance and financial intermediaries such as the Cambodian microlender at issue in the farmer’s case. The strategy specifically relates to places affected by conflict or widespread violence. At the same time, elements of the new strategy will weaken confidence in the institution’s mechanisms to protect consumers in microfinance.
It is not too late for the World Bank and the IFC to act to shore up the effectiveness and credibility of a tool that could lift so many out of poverty and subsistence, should these institutions choose to take key steps.
A Farmer’s Debt Burden
The story of the Cambodian farmer, Nhu Laen, was relayed in The Guardian in October 2023. He had committed suicide in November 2022, a few months after taking another loan from LOLC Cambodia, one of the country’s leading microfinance institutions. His widow, Kwak Nga, reportedly told The Guardian that they had taken this microloan to repay existing debt accrued on earlier loans from the same microlender and to buy a small plot of land to grow soya beans, cassava and cashews. They hoped that additional income generated from farming this smallholding would help them meet the monthly debt payments. As collateral, LOLC Cambodia held the titles for her farm and home, she said.
But with that loan, Laen and Nga had been expected to repay the microlender more than $4,300 between May 2022 and May 2023, almost double their annual income of an estimated $2,200. Laen made $6 a day working a second job on other people’s farms while also preparing his own new farmland. His wife said she believes the stress and exhaustion contributed to his suicide. LOLC Cambodia finally stopped demanding repayment after appeals from a non-governmental organization, the Cambodian League for the Promotion and Defense of Human Rights (LICADHO). The firm’s chief executive, Sok Voeun, reportedly denied any misconduct.
Laen’s suicide occurred nine months after a February 2022 complaint submitted to the IFC ombudsman by LICADHO and another NGO, Equitable Cambodia (EC), on behalf of several complainants in Cambodia. The ombudsman’s office reported that the complainants (their names were kept confidential) alleged that they had been “harmed by predatory and deceptive lending practices, including threatening collection actions,” purportedly committed by six microlending institutions from which they had taken loans. They also cited the impact of those loans on their lives, leading to loss of land and livelihoods, food insecurity, threats to health, and child labor.
Following 3 ½ years of investigation, the IFC ombudsman, Janine Ferretti (formally the director general of the IFC Office of the Compliance Advisor Ombudsman (CAO), the IFC’s independent accountability arm), issued the investigation report in October 2025, finding that microfinance investments in Cambodia had contributed to a predatory debt crisis. The investigation found that IFC’s non-compliance with its environmental and social sustainability policies contributed to predatory lending practices that resulted in child labor, debt-driven suicides, involuntary land loss, food insecurity, health impacts, disruption of education, and threats and reprisals against vulnerable borrowers. The report confirmed the complainants’ claims.
IFC Board Responds – and an Ombudsman Resigns
Although IFC management prepared a “‘Special Management Action Plan’ to address the harms faced by the 18 complainants” and the IFC board said a number of other steps would be taken “to strengthen reprisal risk management, stakeholder engagement, and complaint handling,” the board on June 24 of this year rejected the ombudsman’s findings that the IFC had failed to comply with its sustainability policies. The board’s decision prompted Ferretti to immediately submit her resignation in protest.
The Board then ordered the CAO to stop considering complaints about microfinance lenders while the IFC reviews its policies, removing consumers’ access to any independent accountability process.
In the meantime, on June 8, the World Bank Board announced its refreshed strategy for 2026-2030 on engaging in areas affected by fragility, conflict, and violence, and heralded the plan as a progressive step forward. The strategy’s stated aim is to strengthen resilience and support sustainable development in fragile and conflict-affected settings by expanding private-sector engagement. And again, this is primarily led by the IFC, which is charged with continuing to mobilize private investment, create jobs, and support micro, small and medium enterprises (MSME lending).
Taken together, these decisions by the World Bank Group and its private-sector arm expose a troubling disconnect between the Bank’s growing reliance on financial intermediaries and the safeguards intended to protect the communities they are meant to serve.
Unresolved Questions
The implications extend far beyond Cambodia. As the World Bank prepares to implement its new strategy amid widespread fragility and conflict violence, including in countries such as Lebanon and Syria, unresolved questions surrounding borrower protection and accountability become increasingly significant.
The IFC is already investing in microfinance projects across countries in the Middle East and North Africa via direct loans, equity investments, and advisory services to local microfinance institutions, commercial banks, and private equity funds to build their capacity.
Unlike Cambodia, where land titles frequently serve as collateral, as they did in the case of Nhu Laen, land is often not a practical or reliable form of collateral in many fragile and conflict-affected settings because property rights are weak, contested, or difficult to enforce. Instead, lenders may require a government employee or family member to act as a guarantor. When a borrower defaults, the guarantor’s salary may be subject to seizure. Lenders may also require borrowers to sign post-dated promissory notes (sanadat) before receiving a loan. If payments are missed, these instruments can be used to initiate criminal proceedings in jurisdictions where unpaid debt remains criminalized, forcing families to resort to extreme measures like selling their assets to avoid prison time.
The World Bank Group maintains that consumer protection is primarily the responsibility of national regulatory authorities. However, in many countries affected by conflict, violence, or other markers of fragility where the World Bank works, state institutions are fractured, weak, or lack the capacity to effectively regulate financial markets or protect vulnerable borrowers from abusive lending practices.
In volatile environments where state institutions are weak, expanding finance through financial intermediaries while simultaneously suspending access to independent accountability mechanisms for financial consumer protection in microfinance is worrisome. This will likely lead to harmful lending practices that may go undetected, leaving affected borrowers with fewer avenues for remedy.
The Cambodia case highlights the absence of a clear IFC policy to protect end-borrowers. The IFC can explicitly address this policy gap in its ongoing review of its policies, due to conclude in 2028.
Without robust, concrete changes, expanding finance through financial intermediaries in highly volatile, vulnerable places affected by conflict and violence, without instituting equally robust safeguards, risks exposing already vulnerable communities to greater financial harm.
